The Malaysian Insider

WASHINGTON, July 3 — Talk of emerging green shoots was curtailed after a key report yesterday showed that more Americans than expected lost their jobs last month.

The pace of job losses in the United States quickened last month after slowing just a month earlier, the Labour Department reported.

The American economy shed a much larger-than-expected 467,000 jobs last month, while the unemployment rate rose to 9.5 per cent, from 9.4 per cent.

The dismal numbers are casting a shadow over US President Barack Obama's attempts to staunch months of declines in the labour market.

Workers also saw weekly wages fall, suggesting that Americans will have little appetite to spend and the economy's road to recovery will be bumpy.

The news was a dampener on a nation about to mark the Fourth of July celebrations, and pulled down stocks on Wall Street. The Dow Jones Industrial Average slumped 178 points, or 2.09 per cent, to 8,326 an hour after trading began. European shares fell further in afternoon trade.

Negative sentiments from the weak job data are also likely to affect Asian bourses today, say analysts.

The state of the US job market is keenly watched around the world, given that American consumers have powered much of the growth in the world economy for decades. Rising unemployment will put a crimp on consumer spending.

Job losses were widespread among the construction, manufacturing, and business and professional services sectors. The losses were sharply higher than economists' expectations of 365,000 lost jobs.

The report showed that even as the recession flashes signs of easing, companies will likely want to keep a lid on costs and be wary of hiring until they feel certain the economy is on solid ground.

The rise in the unemployment rate from 9.4 per cent in May was not as sharp as the expected 9.6 per cent. Still, many economists predict that the jobless rate will hit 10 per cent this year, and keep rising into next year, before falling back.

Economists said a fall of 322,000 jobs in May had raised expectations that the market was bottoming out, but the numbers yesterday dashed some of those hopes.

The figures also raised questions about whether the Obama administration, which has already passed a US$787 billion (RM2.7 trillion) stimulus plan, needed to step in again to shore up the American worker.

“The stimulus has probably stabilised income, but it has not moved the economy forward,” said John Silvia, chief economist at Wachovia Corp.

But some economists noted that a decline of 467,000 jobs in a single month is still much better than earlier this year, when 741,000 jobs vanished in January alone. And they said the stimulus plan was only beginning to take effect.

“We have to wait to see where things go,” said Mark Zandi, chief economist at Moody's Economy.com. “If we didn't have the stimulus, the economy would've contracted twice as fast... and the job losses we're suffering now would be very similar to the ones we were suffering at the beginning of the year.”

The latest figures, which were released a day early because of the Fourth of July holiday, highlight a sombre new reality for workers, economists said.

As the recession enters its 20th month, wage growth is stagnating, working hours are dwindling and 14.7 million people are unemployed. In essence, economists say, months of deep, broad job losses are effectively making unemployment a way of life for millions. — NYT

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