Jobless fall brings US cheer but the pain persists in Europe

The mixed fortunes of the world economy were thrown into sharp relief as signs of improvement in the US labour market triggered major gains in stocks across the world but contrasted with predictions of yet more gloom in the eurozone.

As the European Commission sounded the alarm about the likelihood of a deeper-than-expected recession in the struggling currency bloc, the US Labour Department said the world’s largest economy had added 165,000 jobs last month, and hiring in the preceding two months had been better than initially thought. The rise in US payrolls was higher than economists’ expectations of around 145-150,000 jobs.

The news drove up US stock markets, as for the first time ever the S&P 500 closed above the 1,600 point mark and the Dow Jones Industrial Average temporarily breached the 15,000 point level during intra-day trading. In London the FTSE 100 index closed up 60.75 points at 6,521.46.

Along with news of improved hiring came confirmation of a decline in the US unemployment rate, which had been expected to remain steady at 7.6 per cent. Instead, it fell to 7.5 per cent, its lowest since December 2008 when the global financial crisis was at its peak. Further good news came in the form of upward revisions to the figures for February and March. The Labour Department said payrolls had climbed by 138,000 in March, against an initial estimate of 88,000, and 332,000 in February, which equated to the biggest gain since early 2010.

The better US news contrasted with the prospect of lingering pain in the eurozone as the European Commission warned of a worse-than-expected recession this year, with deficits falling more slowly than expected.

The Commission is braced for a 0.4 per cent contraction this year and growth of 1.2 per cent next, trimming its February predictions of a 0.3 per cent decline in 2013 followed by 1.4 per cent growth in 2014.

Only Germany among the five major eurozone economies will eke out growth this year, with France, Spain, Italy and the Netherlands mired in recession, its forecasts showed. Italy and France meanwhile will cut their deficit more slowly than expected due to recession.