Sun, Sep 08, 2013 - Page 13 News List

US unemployment hits four-year low

STRUGGLING:Weaker-than-expected US jobs figures for last month are expected to influence the Federal Reserve’s scale-back of its quantitative easing measures

Reuters, WASHINGTON

US employers hired fewer workers than expected last month and the jobless rate hit a four-and-a-half-year low as Americans gave up the search for work, complicating the US Federal Reserve’s decision on whether to scale back its massive monetary stimulus this month.

Non-farm payrolls increased by 169,000 jobs last month, the US Department of Labor said on Friday, falling short of the 180,000 Wall Street had expected and adding to signs that economic growth may have slowed a bit in the third quarter.

While economists believe the Fed could still announce a tapering of its monthly bond purchases at its Sept. 17 to 18 policy meeting, they said the weak data increased chances of a delay.

“A compromise between hawks and doves might be that the tapering will be announced in September, but that the purchase amount will be reduced by an even smaller amount than we currently anticipate,” New York-based Unicredit Research chief US economist Harm Bandholz said.

The US central bank has been buying US$85 billion in bonds per month to hold interest rates down.

Reuters polled dealers of big bonds after the jobs data was released and found that 13 of the 18 institutions expect the Fed to dial back its purchases this month. Of those 13, the median forecast was for a cut of US$15 billion. The US dollar fell from a seven-week high against the euro and slumped against the yen after the jobs report. The data also fueled a rally in US government bonds, with the yield on the benchmark 10 year note falling back below 3 percent.

US stocks ended little changed with investors jittery over a potential military strike against Syria.

Not only did hiring miss expectations last month, but the job count for June and July was revised to show 74,000 fewer positions added than previously reported.

While the unemployment rate fell one 10th of a percentage point to 7.3 percent, its lowest level since December 2008, the decline reflected a drop in the share of working-age Americans who either have a job or are looking for one.

That participation measure reached its lowest point since August 1978, a further sign of underlying economic weakness. The rate for men touched a record low.

“Declining participation is bad for financing entitlements long-term and the potential economic growth trend,” Wells chief economist Fargo John Silvia said.

Fed officials have made clear they would base their decision about bond-buying on the progress the labor market has made since they launched their third round of quantitative easing a year ago. When they started that round, they were looking at a jobless rate that stood at 8.1 percent.

Still, much of the decline in unemployment has been because people are dropping out of the labor force, partly due to frustration over dim job prospects, and that takes some of the shine off the improving rate.

Some Fed officials have indicated they are ready to scale back their stimulus, but others have been less committal, making it hard to discern where the consensus on the policymaking Federal Open Market Committee (FOMC) lies.

“This is a period where it’s even more important to go into an FOMC meeting with an open mind,” Chicago Federal Reserve Bank President Charles Evans said on Friday. “There’s been cumulative progress on the economy. I can be persuaded that there has been enough improvement.”

This story has been viewed 1487 times.
TOP top