Fears over US economy return after slowdown in jobs market

Worries that spending cuts and higher taxes are hitting employment prospects

New York

A sudden, sharp slowdown in the pace at which American employers are adding jobs revived concerns about the world's largest economy yesterday, with fears growing about the impact government spending cuts and higher taxes are having on the labour market.

Figures from the US Labour Department showed that employers had added just 88,000 jobs last month, the slowest pace in nine months. That was less than half of what private economists had predicted. On average, they had pencilled in a rise of around 200,000 jobs.

While the jobless rate fell by one-tenth of a percentage point to 7.6 per cent last month, that was mostly because of people dropping out of the labour force.

The slim gains in March came exclusively from the private sector, which added 95,000 jobs, while government payrolls slumped by 7,000.

Particularly worrying was the fact that the decline in government payrolls was mostly down to cuts at the US Postal Service, which is struggling financially. That means more reductions are likely in the coming months, as the so-called sequester of billions of dollars in spending cuts takes full effect. The package has not affected the Postal Service.

In the private sector, retailers cut more than 24,000 jobs in March, suggesting caution in America's malls and shopping centres as higher taxes weigh on consumers.

Construction companies, meanwhile, added 18,000 jobs last month, with the sector continuing to show strength, partly as a result of the massive stimulus program put in place by the US Federal Reserve.

Those searching for a silver lining found two: in the upward revisions to the figures for January and February. The Labour Department said 61,000 more jobs had been added over the two-month period than previously estimated. The figure for January now stands at 148,000, while that for February was revised up to 268,000.

The figures led to falls in US stocks during morning trading. However, the declines were not particularly severe, something that could be attributed to the view that the weak jobs report would only encourage the Federal Reserve to stick with its stimulus programme for the near future. Currently, the central bank is buying around $85bn (£55bn) of mortgage and government-bonds to support the economy.

Although some senior central banks figures have recently raised the possibility of a pullback in the programme, the weak jobs data is likely to support the case of those who want the Federal Reserve to stay the course, at least until there is a marked improvement in the economic picture.

Winding down the stimulus programme too soon could trigger a slump in the wider economy.

"The recent discussions about the Fed backing off from its quantitative easing has been premature," Russell Price, a senior economist at Ameriprise Financial Services, said.

Some economists said the March jobs figures were just confirmation of the fact that the underlying picture remained weak, despite the optimism sparked in some quarters by the positive reports for January and February. At the time, many had viewed the reports as evidence that the recovery was finally on a firm footing.

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

PROMOTED VIDEO
Arts and Entertainment
Actor and director Zach Braff
tv

Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
tv

Life and Style
i100

Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes hobby look 'dysfunctional'
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Property Underwriter

£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week