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Business News

Blow for US recovery as fewer jobs are created

Worries over revival's momentum as increase in non-farm payroll is slowest since October

The recovery hopes of the US economy hit a setback yesterday as employment figures showed far fewer jobs were created in the country last month than expected.

The keenly watched non-farm payroll numbers from the Labor Department showed an increase in the jobs market during March of 120,000, despite many economists having predicted a rise of more than 200,000.

After a run of encouraging releases over the past few months, this was the lowest increase since October, raising fears over the momentum of the country's economic recovery.

The Labor Department also said the unemployment rate had dropped to 8.2 per cent, its lowest for three years, although this was the result of a fall in the number of people looking for work.

The employment figures are expected to add to the pressure on the US Federal Reserve to provide a boost to the economy by introducing further quantitative easing measures.

Minutes released last Tuesday from the latest meeting of the Federal Open Market Committee seemed to show members moving away from another round of bond buying.

However, yesterday the price of US government debt rose on hopes the data will increase the likelihood of additional quantitative easing. Thomas Simons, an economist at Jefferies, claimed the numbers would "turn up the heat on the debate for QE3 since a deceleration in the economic data has been highlighted as a prerequisite for such a programme."

Yesterday's release revised the number of jobs added in February from 227,000 to 240,000 while lowering January's total from 284,000 to 275,000. The subsequent fall in March was being seen as further evidence that the mild winter in the US helped support employment figures for the previous months.

The strong run of data had given a boost to President Barack Obama's chances of winning re-election in November, although the latest release will cause his campaign concerns.

President Obama said he welcomed the figures, but added that it was "clear to every American there will still be ups and downs along the way".

The White House's economic adviser Gene Sperling responded to the release by saying that although the economy was "making progress ... we still have a long way to go".

He went on to attack the Republicans in Congress, saying "partisanship ... has blocked us from having a stronger job market".

Cambridge Mercantile's Jason Conibear argued the figures were not a "downer", saying: "We can't expect miracles, the main thing is that there's still forward momentum. The US economy is by no means tanking here".

Michael Gapen from Barclays said that given "the report reflects only one month of data and some of the underlying cyclical sectors registered payroll gains, we do not view it as conclusively signalling a shift to a lower trend rate of employment growth". While US markets were closed for Easter and Passover, stock futures dropped in response, suggesting stocks will come under pressure when trading resumes on Monday.