Sun, Jul 08, 2012 - Page 13 News List

Poor US hiring shows economy slows to a crawl

Reuters, Washington

US employers hired at a dismal pace last month, raising pressure on the US Federal Reserve to do more to boost the economy and dealing another setback to US President Barack Obama’s re-election bid.

The US Department of Labor said on Friday that non-farm payrolls grew by just 80,000 jobs last month, the third straight month below 100,000.

Job creation was too weak to bring down the country’s 8.2 percent unemployment rate and the report fueled concerns that Europe’s debt crisis was shifting the US economy into low gear.

“We’re just crawling forward here,” said Nigel Gault, an economist at IHS Global Insight in Lexington, Massachusetts.

While Obama holds a narrow lead in most national polls, many voters are critical of his handling of the economy. Speaking at a campaign rally in Ohio, Obama said the pace of job creation needed to pick up.

“It’s still tough out there,” he said.

Mitt Romney, Obama’s Republican challenger, assailed the president for not doing enough to get people back to work.

“This kick in the gut has got to end,” Romney told reporters in New Hampshire.

US stocks closed about 1 percent lower, while yields on US government debt fell on bets the Fed would launch a new round of bond purchases to lower borrowing costs and spur hiring. The US dollar fell against the yen, but rose against the euro as investors sought a safe haven.

Last month, the Fed extended a program aimed at keeping long-term interest rates down and said it was prepared to do more to spur the economic recovery if needed.

The somber jobs report could move the central bank closer to a third round of so-called quantitative easing, or QE3.

Reuters polled 16 primary dealers — the large financial institutions that do business with the Fed — and found 12 expect QE3 by year-end, with eight expecting it either at the Fed’s next meeting, which wraps up on Aug. 1, or its subsequent gathering in September.

“You could see something as early as next month,” said Brian Levitt, an economist at OppenheimerFunds in New York.

Economists estimate roughly 125,000 jobs are needed each month just to hold the jobless rate steady. During the second quarter, job creation averaged 75,000 per month, down from an average of 226,000 in the first quarter.

Part of the slowdown could be because mild weather led companies to boost hiring during the winter at spring’s expense.

However, weakness in everything from factory activity to retail sales suggests something more fundamental is at play and the jobs data buttressed that view.

Last month, factories added 11,000 workers and construction employment edged up 2,000, the first gain since January and further evidence the long-depressed housing market is steadying.

However, hiring slowed sharply in the services industry, with retailers cutting 5,400 workers.

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