Fresh signs of weakness in the American economy emerged yesterday, with worrying new employment figures pushing a weak dollar still lower on expectations that the Federal Reserve's policy of aggressive interest rate cuts will be maintained against a background of faltering growth.
Employment in the United States fell in January for the first time since 2003, according to the US Bureau for Labour Statistics. It said non-farm payroll jobs had slipped by 17,000, after an upwardly revised 82,000 increase in December. Even if the new data are also revised upwards, the US labour market is still in its weakest state for some years. The unemployment rate dipped slightly to 4.9 per cent last month, from 5 per cent, as the labour force shrank slightly.
Jonathan Said, senior economist at the Centre for Economics and Business Research, said: "Whilst this trend level of payroll data is not quite in line with negative GDP growth, it is not far from being consistent with a recession."
The job losses in January were spread across the US economy. Government and private sector employment fell, with manufacturing, construction and professional and business services all registering declines.
Wage growth also slowed, a further indication that the economic slowdown is starting to affect the labour market. Any rise in unemployment and the fear of unemployment could have a catastrophic effect on an already depressed housing market. The Fed's recent interest rate reductions and President Bush's fiscal stimulus package may not arrive in time to prevent such a slump.
Average hourly earnings for employees rose to $17.75 in January, a 0.2 per cent increase from the previous month. Economists had been predicting a slightly larger gain of 0.3 per cent. Over the last 12 months, wages rose by 3.7 per cent, but higher energy and food prices are eroding the purchasing power of US households.Reuse content