Sun, Aug 09, 2009 - Page 11 News List

Obama says US economy saved from ‘catastrophe’

GRUELING CLIMB: The latest Labor Department report showed US unemployment dipped to 9.4 percent last month, exceeding private economists’ expectations

AFP , WASHINGTON

US President Barack Obama on Friday seized on a surprise drop in job losses to proclaim his policies had staved off economic catastrophe, seeking new momentum after days of draining political attacks.

The new data — which showed unemployment dip to a better-than-expected 9.4 percent last month, turned a White House damage control exercise into a boost for Obama’s fortunes.

The president warned, however, that the economy still faced a grueling climb out of a deep valley, and aides said the jobless rate was still likely to top 10 percent this year.

“This morning we received additional signs that the worst may be behind us,” Obama said in remarks relocated from a military barracks to the ceremonial surroundings of the sun-drenched White House Rose Garden.

“We are losing jobs at less than half the rate we were when I took office. We have pulled the financial system back from the brink,” Obama said, warming to a counter-attack against Republican assaults on his economic policies.

The president argued that his mammoth US$787 billion stimulus plan, financial industry rescues and mortgage crisis measures had revived credit markets and boosted stock markets on which Americans rely for pensions.

“While we have rescued our economy from catastrophe, we have also begun to build a new foundation for growth,” Obama said, but he also warned that tough times lay ahead before the economy would be restored to full prosperity. “We have a steep mountain to climb and we started in a very deep valley.”

The US Labor Department’s much-awaited monthly report was better than expected by private economists, who had forecast a loss of 325,000 jobs and a jobless rate rising to 9.6 percent from the June level of 9.5 percent.

Wall Street also welcomed the job figures. US stocks surged to new 2009 highs with the Dow Jones up 1.21 percent to close at 9,368.26 and European bourses enjoying strong rallies after news of the report broke.

“With the fall-off in the pace of job losses appearing to be gaining some traction and the improved tone of other economic reports, it appears that the US recession may well be in its last throes,” said Millan Mulraine, economic strategist at TD Securities.

Dean Maki, economist at Barclays Capital, said the report and other upbeat data “reinforce our view that the US recession ended in June,” while Peter Kretzmer, senior economist at Bank of America, said the latest figure “confirms that the recession is certainly diminishing in intensity if it hasn’t ended already.”

Other analysts warned against celebrating too quickly for an economy in which payroll employment has fallen by 6.7 million since the recession began.

Eugenio Aleman, a senior economist at Wells Fargo, explained the shock figures by saying that a significant number of disenchanted workers had left the labor force and were not therefore listed as unemployed. Those in the labor force fell by 422,000.

“I was surprised about the unemployment number coming down to 9.4 percent, but that was because of people dropping out of the labor force, so that is probably not going to be repeated in the future,” Aleman said.

Joseph LaVorgna, economist at Deutsche Bank said the report suggests a fragile recovery is underway. One key is that aggregate hours worked — sometimes seen as a proxy for economic activity — edged higher overall and in the factory sector.

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