No respite as 430,000 join US jobless in just one week

 

New York

There is still no sign of any relief for the US jobs market as the latest weekly unemployment figures showed an unexpectedly big jump in new people claiming benefit.

A total of 428,000 people joined the jobless rolls last week, 11,000 more than the previous week and 10,000 more than economists had predicted. The figures are far above the 400,000 level at which economists believe the unemployment can start to decline. The jobless rate in the world's largest economy is currently 9.1 per cent, crimping the economic recovery.

Meanwhile, on two fronts, the options for government action to ease the unemployment problem appeared to narrow yesterday. Inflation data for August came in above expectations, rising from 3.6 per cent to 3.8 per cent. Excluding volatile energy and food prices, the measure that the Federal Reserve uses for targeting interest rate policy rose to 2 per cent, its highest level since November 2008.

The higher-than-anticipated inflation levels limit the Fed's room for manoeuvre next week when it plans to consider a new round of interventions in the credit markets in an attempt to cut interest rates for homebuyers and businesses. There were also growing doubts over whether Congress will decide to use fiscal policy to boost the economy and improve hiring. President Barack Obama's proposed $447bn stimulus package met with additional opposition from Republican lawmakers and even some Democrats.

Two new manufacturing surveys, by the Philadelphia and New York branches of the Fed, showed continued contraction in activity over the past month, though a national industrial production survey showed a 0.2 per cent improvement thanks to a pick-up in car production.

"The incoming data in the real economy is still pretty weak," said Paul Ashworth, chief US economist at Capital Economics. "But the continued rise in inflation in August, which saw both headline and core consumer price inflation hit two-year highs, is another reason to suspect that the Fed will shy away from a further round of full-blown quantitative easing for the time being."

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