US economy sheds more jobs

In a report that disappointed many analysts, US unemployment data showed the world’s largest economy unexpectedly lost 93,000 jobs in August, the most since March.

    George Bush, like his father, is presiding over a jobless recovery

    At the same time, the unemployment rate fell to 6.1 percent as more discouraged workers stopped seeking jobs, government figures showed.

    Payrolls fell after a revised drop of 49,000 in July, the Labour Department said in Washington. The jobless rate fell from 6.2% in July and 6.4% in June, the highest since 1994.

    Manufacturers have cut jobs for 37 straight months in a bid to reduce costs and boost profits. Friday's report shows some 2.7 million jobs have been lost since President George Bush took office in 2001.

    Productivity outstrips demand

    Productivity has overtaken demand and as a result companies are cutting jobs as inventories mount.

    "This is a job-loss recovery'' from the recession that ended in November 2001, Federal Reserve Governor Ben S. Bernanke told a Bloomberg News economics forum on Friday.

    Bush’s father also presided over a “jobless” recovery in 1991, and was voted out in 1992 largely as the result of a struggling economy. Many economists expected non-farm payrolls to be unchanged or slightly better.

    Still, compared with 1991, “it's a much bigger episode in terms of lost jobs and offsetting productivity gains,” Bernanke told Bloomberg.

    Figures weigh on markets

    The markets reacted in a muted manner to the figures, with the Dow Jones, S&P and the NASDAQ all falling, paring gains earlier in the week. The US government benchmark bond rose, in price terms, as much as 1.25 points, the most in almost two years.

    "It confirms my thesis that there are structural shifts in the labour market that could impede new hiring”

    Morgan Stanley economist

    Employers have slashed 1.4 million jobs since the economy exited the recession that ended in November 2001. Productivity grew at 6.8% in the second quarter ended 30 June, a recent government report showed.

    The recovery was largely fuelled by consumer spending, itself boosted by tax cuts and historic interest rates, which is currently at 1%. A drop in spending is clearly correlated to increasing unemployment.

    Last week, a University of Michigan survey showed US consumer confidence fell more than expected in August on concern about employment prospects and higher fuel prices.

    Efficiency gains

    One of the problems is that efficiency gains have allowed companies to produce the same amount with fewer workers. Some economists said it will take growth of at least 3.5 percent to reduce unemployment.

    The three-day blackout in the Northeast and Midwest of America had a minimal impact on manufacturers productivity, the report said.

    “This is a major disappointment,” William Sullivan, a senior economist at Morgan Stanley told CNBC. “It confirms my thesis that there are structural shifts in the labour market that could impede new hiring.”

    SOURCE: Aljazeera + Agencies


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