US jobs disappointment cuts chances of Fed easing stimulus


New York

The US economy created fewer jobs than forecast in August, dampening expectations that the Federal Reserve will start weaning the US economy off its stimulus programme this month.

The weakness in the US labour market was underscored by a fresh fall in the participation rate, which tracks the number of Americans in work and those who are unemployed but looking for work.

According to US labour department, the figure declined to 63.2 per cent, the lowest since 1978, taking the unemployment rate in the world’s largest economy from 7.4 per cent to 7.3 per cent, the lowest since the end of 2008. Overall, 169,000 new jobs were created in August, against expectations of 175,000 to 180,000. For July, the labour department revised its estimate of the number of new jobs to 105,000 from 162,000. The figure for June dropped to 172,000 from 188,000.

The figures present a dilemma for the Federal Reserve, which was widely expected to announce a reduction in the extraordinary stimulus measures that have been supporting the US since the financial crisis after its next meeting later this month.

In particular, the Fed was expected announce a cut – or taper – in its programme of buying up $85bn (£55bn) of mortgage – and government-related bonds every month. In the summer, against the backdrop of improving economic indicators, the Fed’s chairman, Ben Bernanke, outlined the timetable the central bank might follow: a reduction in the scope of the programme around the end of this year and wind down the bond-buying programme around the middle of next year.

A key driver of the Fed’s and the market’s optimism about the US economy has been the unemployment picture. As the figures improved, most economists began forecasting the first reduction in the stimulus this month.

But the August jobs report, and what it says about the underlying weakness in the labour market, will complicate matters for the Fed’s policymakers, who must also factor in the potentially destabilising effects of a US strike on Syria. The mere suggestion that the Fed might reduce the scope of its programme has already triggered widespread volatility on international stock and currency markets, as investors eyed the beginning of the end of an era in which the central bank has ensured a steady supply of cheap money.

Wayne Kaufman, the chief market strategist at Rockwell Securities in New York, said the revisions in the August report were “a little shocking”. The figures, he told Reuters, increased the “odds of the Fed holding steady”.

Others disagreed. “The market is taking this morning’s somewhat disappointing data as suggesting that the Fed will not taper in September,” Mohamed el-Erian, the head of bond investor Pimco, said. “I am not so sure that is the case.”

Adult movie shutdown hits economic data

Part of the weakness in the August jobs figures stemmed from weaker employment trends in the movie business, with the industry shedding 22,000 jobs.

While the figures did not explain the precise reason for the losses, The Washington Post  suggested the weakness might be down to the temporary shutdown of the US adult film business in August. Studios stopped filming after an actress  tested positive for HIV.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent