Sun, Aug 05, 2012 - Page 13 News List

US hiring picks up, but not enough to sideline Fed as election pressure builds

IS IT WORKING?The latest job figures indicate that the economy is slowly improving, but the country’s central bank has not yet ruled out further stimulus measures


US employers hired the most workers in five months last month, but an increase in the jobless rate to 8.3 percent kept prospects of further monetary stimulus from the US Federal Reserve on the table.

Nonfarm payrolls rose 163,000 last month, the US Labor Department said on Friday, breaking three straight months of job gains below 100,000 and offering hope for the ailing economy.

“It’s a relief we did not post another number like 75,000, but the reality is it’s not night and day. It’s not as though it brings us all the way back to being wildly optimistic,” said Robert DiClemente, chief US economist at global banking group Citigroup in New York.

While the report gave talking points to Republicans and Democrats for the upcoming general election, investors on Wall Street shrugged off the rise in the jobless rate to a five-month high and boosted stocks to their highest level since early May.

The unemployment rate rose from 8.2 percent in June, even as more people gave up the search for work and a survey of households showed a drop in employment.

The Fed on Wednesday sent a stronger signal that a new round of major support could be on the way if the recovery does not pick up. The labor market has slowed after hefty gains in the winter, spelling trouble for US President Barack Obama in the November election.

A recent Reuters/Ipsos poll showed 36 percent of registered voters believe Republican presidential candidate Mitt Romney has a better plan for the economy, compared with 31 percent who have faith in Obama’s policies.

Both Obama and Romney used the jobs report to plead their case to US middle-class voters. Obama said the Republican tax plan would hurt them.

The step-up in hiring, which beat economists’ expectations of a 100,000 gain, left economists divided on whether the Fed would ease monetary policy at its Sept. 12-13 meeting, as had been widely anticipated before the jobs report.

“We think the odds are still tilted in favor of more Fed accommodation at the September meeting, and that call obviously remains contingent on economic and financial developments over the next six weeks,” said Michael Feroli, an economist at JPMorgan in New York.

The increase in payrolls last month was confirmation the slump in job growth in the second quarter was largely payback for an unusually warm winter that had brought forward hiring into the early months of the year, economists said.

As such, this suggested that employment numbers for this month could look more like last month’s, reducing the pressure for the Fed to take further action next month.

“That doesn’t mean they are not going to go, it just means their sense of urgency for pulling the trigger and moving again is marginally less than it was,” said Ray Stone, an economist at Stone & McCarthy Research Associates in New Jersey.

Fed Chairman Ben Bernanke’s speech at the central bank’s high-profile gathering in Wyoming, later this month could offer clues on the near-term course of monetary policy. He used that forum in 2010 to communicate the Fed’s intention to pursue a second round of quantitative easing, or “QE2.”

So far this year, job growth has averaged at around 151,000 per month, almost the same as the monthly average last year and roughly the amount needed just to keep the unemployment rate steady.

Even if the payrolls growth buys the Fed time next month, further monetary stimulus remains on the cards given the threat to the economy from a potential tightening in fiscal policy next year and the ongoing debt troubles in Europe.

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