Signs of faltering growth as fears of 'jobless recovery' materialise

The global economic recovery is showing signs of losing momentum, according to the latest evidence.

Patchy improvements in the American and European labour markets and a serious drop in confidence in the building trade in the UK suggested that fiscal tightening, a still fragile financial system and the eurozone debt crisis are holding back economic revival.

The data points to the increasing possibility of a "double dip" recession across the advanced economies.

The number of Americans in work – a key factor driving consumption growth in the world's largest economy – showed the first month-on-month decline in this year, said the US Department of Labor.

Total non-farm payrolls declined by 125,000 in June, against a 433,000 rise in May. However, observers said that the figures were distorted by the layoff of 225,000 temporary staff working on the 2010 US census.

Private sector employment rose by 83,000 in June, actually larger than the 33,000 increase in May but modest compared to growth in March and April. That was also a little slower than market expectations.

A decline in the size of the labour force meant that the unemployment rate fell from 9.7 per cent to 9.5 per cent, the second consecutive fall and the lowest rate since July last year.

Unemployment stood at 14.6 million in June while the number of long-term unemployed (longer than 27 weeks) remained steady at 6.8 million people.

Employee earnings growth remains muted, at just 1.7 per cent on the year.

The longer term concern in the US is for a "jobless recovery" at a time when many in the US Congress are seeking to reverse the extension in unemployment pay put in place at the height of the recession. States provide up to 26 weeks of unemployment insurance benefits for jobless workers.

Federal aid in response to the weak economy has extended payouts for up to 99 weeks in the states hardest hit by the rise in unemployment.

The US Labor Department estimates that 1.7 million will lose benefits by this weekend, and a total of more than three million could lose benefits by the end of July if an extension is not passed.

Job creation has lagged way behind what has been a spirited recovery in GDP in the US, and economists have suggested a number of explanations, including possible "labour hoarding" during the downturn and companies using overtime and temporary staff to cover extra demand.

Paul Dales, US economist at Capital Economics, said: "While an outright double-dip recession remains unlikely, growth will slow later this year and into 2011, perhaps more markedly than we have been forecasting all along."

Eurozone unemployment remains slightly higher than in the US and markedly higher than the UK's current rate of 7.9 per cent.

Eurostat said that the rate was stable at a downwardly revised rate of 10 per cent in May, as the number of jobless rose 35,000. Although that follows a marginal drop in the dole queues of 6,000 in April, the general trend is down.

Howard Archer, the chief economist at Global Insight said: "Despite the recent, much reduced overall rise in unemployment in the last couple of months and signs of stabilisation in employment in the latest purchasing managers' surveys, we think it is premature to sound the all-clear on the eurozone labour market front.

"We believe that eurozone growth will probably not be strong enough on a sustained basis to generate net jobs for some time to come."

Coverage of the eurozone crisis and the prospect of further cuts to public spending on infrastructure lay behind a sharp drop in business sentiment in the building trade, according to the Chartered Institute of Purchasing and Supply (Cips).

The Markit/Cips survey showed the sharpest fall in forward confidence in the survey's 30-year history.

David Noble, the chief executive at Cips, said: "A stark reminder of just how hard this sector has been hit is the handful of cranes currently dotting the skyline and the half-finished construction projects.

"Recovery in the second half of the year is likely to remain fragile and we are still a long way off seeing the construction industry operate the way it did pre-recession."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most