Alarm bells ring over US jobs

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The Independent Online

Unemployment in the US rose closer to a tenth of the population last month, setting off "alarm bells" over the strength of the economy.

The bleak figures justified the Federal Reserve's recent policy to reintroduce quantitative easing, economists said.

The report from the US Labour Department yesterday showed 15.1 million were out of work in November.

The rate has edged up to 9.8 per cent after remaining at 9.6 per cent during the previous three months. About 40 per cent were long-term unemployed – out of work for 27 weeks or more – a figure running at its highest level since August.

Yet the survey found that total "non-farm payrolls" – jobs in goods-producing, construction and manufacturing companies – increased 39,000, far lower than the 138,000 expected by economists and the 172,000 non-payroll jobs gained in October.

Owen James, an economist at the Centre for Economics and Business Research, said: "This month's figure raises alarm bells over the strength of the economy in the US." He said employment growth of 150,000 was necessary to keep pace with population growth and 200,000 is needed to reduce unemployment.

This comes just days after the Federal Reserve reiterated the fragility of the US's economic recovery. Mr James said: "Combined with today's statistics, the Fed's policy of pumping an additional $600bn into the economy appears vindicated."

There were 40,000 job gains in temporary help services and a further 19,000 in healthcare. Yet 28,000 jobs were lost in retail trade with department stores and furniture and home furnishing stores particularly affected.

Manufacturing employment fell by 13,000, the most in three months. This came despite positive manufacturing data released on Wednesday by the Institute of Supply Management.

Mr James said that while the US economy needed businesses to invest in growth, many remained cautious about hiring. "On this basis growth looks set to edge along at a far weaker pace than one usually associates with the world's largest economy and the Fed is left to hope that more quantitative easing will stimulate the recovery," he added.

Surprise gain in service sector

* The UK services sector saw an unexpected rise in activity in new orders during October, according to the Markit/ Cips Purchasing Managers Index. It hit a four-month high of 53.2, but employment remained low as companies chose not to replace leavers.

David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said that, while the PMI figures looked positive: "Real and sustained growth remains subdued. The consequences of government spending cuts are not yet fully realised and business expectations remain historically low."