THE US ADDED a meagre 96,000 jobs in August, fresh data showed today which is bad news for President Barack Obama’s re-election fight but bolsters Federal Reserve chief Ben Bernanke’s push for more help for the economy.
While the overall jobless rate fell to 8.1 per cent from 8.3 per cent in July, that was mainly due to another 368,000 people giving up searching for jobs and leaving the labour force, Labor Department data showed.
The number of net new jobs generated by the weak economy was lower than expected, and, combined with cuts to the previous two month’s numbers, underscored the stall in the economy in recent months: the net new jobs number was well under the year’s average of 139,000 a month and 153,000 in 2011.
Economists said it was likely to strengthen the case for fresh action at the Federal Reserve to boost growth when its policy board meets on Wednesday and Thursday, either delivering stronger easy-money policy signals or even a third round of quantitative easing (QE), or bond purchases.
“This report reaffirms that the US economy and labour market are showing unimpressive and extremely modest improvements,” said Jason Schenker at Prestige Economics.
It “gives the Fed a lot to think about next week. The Fed may not implement QE3, but today’s report raises the stakes for the Fed to implement some level of additional ‘nontraditional’ monetary policies.”
After hitting new multi-year highs on Thursday, US markets were mixed after the data came out, the S&P 500 adding 0.2 per cent while the Nasdaq was barely lower.
The dollar, meanwhile, dropped, falling to $1.27 against the euro, as traders anticipated more easing by the Fed.
Although the headline unemployment rate looked improved, the details of the data showed that Obama’s efforts to boost jobs around the country are still having little impact on the ground, an issue that will continue to dog his fight to win reelection in November.
While the total number of officially unemployed fell to 12.5 million from 12.8 million people, the Labor Department’s data showed a sharp decline in the size of the labour force and a rise in those not looking for jobs.
The employment-to-population ratio hit a new low of 58.3 per cent, compared with the 65 per cent-plus level that was normal before the 2008-2009 recession.
Moreover, the duration of unemployment for those looking for jobs — a key worry of Fed Chairman Bernanke — was little-changed, with around 40 percent still searching for work for more than 27 weeks.
Last week Bernanke told a conference that labour market stagnation is “a grave concern,” saying that “persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.”
Job creation continues to be driven by the private sector, which generated a net 103,000 new jobs, against continuing cuts by the public sector.
But that figure only demonstrates that businesses remain reticent or unable to hire. Many say they are concerned about the ongoing financial crisis in the eurozone, the sharp slowdown in China, and the US government’s political stalemate over economic policy ahead of the November 6 election.
“Given Bernanke’s speech last week, the Fed is likely to either launch a third round of QE or extend its commitment to zero rates into 2015,” said John Ryding and Conrad DeQuadros at RDQ Economics.
“However, in our view this will do little, if anything, to boost growth. There is no shortage of liquidity in the banking system with reserves at almost $1.5 trillion.
“There is, however, considerable uncertainty on the outlook for the taxation of labour and capital in 2013, which we think is the major challenge for the economy over the remainder of this year.”
- (c) AFP, 2012