Shock US jobs figures spark jitters for recovery prospects

The jobs growth data for June and July was revised down by 28,000

The worst American jobs report in eight months sent the dollar down sharply yesterday and prompted doubts about the underlying strength of the US economy.

The Bureau of Labor Statistics reported that non-farm payrolls increased by just 142,000 in August, much lower than analysts’ expectations of 225,000 new jobs and the weakest rate of expansion since last December.

The pound leapt half a cent on the figures, before slipping back to $1.6302. The euro briefly rose 0.12 per cent versus the greenback, despite the European Central Bank’s monetary stimulus plans unveiled this week. Yields on 10-year Treasury bonds fell eight basis points to 2.4 per cent.

The jobs growth data for June and July was revised down by 28,000. The breakdown of the figures also showed that manufacturing showed no employment growth on the month.

While some analysts said the figures were a “blip” and out of line with labour market surveys, others said they suggested fragility in the world’s largest economy. “There is still momentum, but any sense of the inevitability of strong US job growth has evaporated,” said Tony Wilson of Fexco. “The underlying message appears to be that the US labour market recovery, which until this month appeared to have been firing on all cylinders, has hit a snag,” said Millan Mulraine of TD Securities in New York.

The participation rate fell slightly to 62.8 per cent, against 62.9 per cent in July. Average hourly wages rose by just 2.1 per cent year on year.

However, the number of people working part-time because they could not get full time work fell by 234,000 to 7.3 million, while the number of long-term unemployed declined by 192,000 to 3 million. The headline unemployment rate fell from 6.2 per cent to 6.1 per cent.

The chair of the Federal Reserve, Janet Yellen, gave a carefully balanced speech at then Jackson Hole symposium of central bankers in Wyoming last month, which left traders unsure about when the American central bank is likely to put up its benchmark interest rate.

US GDP bounced back in the second quarter, growing 1 per cent, after slumping by 0.5 per cent in the big freeze in the first quarter of the year.