Friday September 5, 03:31 PM
US jobless rate jumps to 6.1% as 84,000 jobs cut
By Rob Lever
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WASHINGTON (AFP) - US unemployment jumped to a five-year high of 6.1 percent as 84,000 jobs were slashed in August, according to data released Friday which analysts said highlights recession-like conditions.
The Labor Department report -- considered one of the best indicators of economic momentum -- marked the eighth consecutive month of shrinking nonfarm payrolls, and was worse than expected by private economists.
Wall Street analysts had expected a loss of 75,000 jobs and a steady unemployment rate of 5.7 percent for the month.
The agency also revised its figures from the prior two months to show a loss of 60,000 positions in July and 100,000 in June, up from earlier estimates of a drop of 51,000 in each of the two months.
The latest figures show a cumulative loss of 605,000 US jobs since the start of 2008, highlighting the woes of the world's largest economy from a horrific housing slump and credit squeeze.
The report suggests a struggling economy in which employers are cutting more jobs and reluctant to hire because of weak consumer and business confidence.
"That screams recession," John Ryding at RDQ Economics said of the surging unemployment rate, which is up a full percentage point in the past two quarters. "Those numbers imply economic conditions were contractionary."
Although official data showed the US gross domestic product (GDP) grew at a robust 3.3 percent in the second quarter, many analysts say that figure was skewed by a surge in exports and helped by spending from a massive tax rebate program.
Avery Shenfeld, senior economist at CIBC World Markets, said the payrolls figure indicates a weak economy teetering close to recession.
"We are looking for the turn in economic conditions and the second quarter GDP report gave a false signal that the turn had occurred," Shenfeld said.
"Taking the revisions into account and including the big rise in the jobless rate, this (payrolls data) is clearly weaker than the markets anticipated. We haven't had a recession in GDP growth but the rise in unemployment is looking as bad as it gets in a recession."
Ian Shepherdson, chief US economist at High Frequency Economics, called the report "grim," adding that "the big shock is the 6.1 percent unemployment rate," which suggests further weakness ahead
"Our forecast of a 7.0 percent peak headline (jobless) rate might now be too low," he added.
The report comes less than two weeks ahead of a meeting of Federal Reserve policymakers on interest rates.
The current base rate of 2.0 percent is considered stimulative but officials say troubles in the banking sector make credit difficult. Some Fed officials have said the next move is likely a rate hike in view of inflation pressures but analysts say the central bank is unlikely to move to choke off economic activity.
Sal Guatieri, economist at BMO Capital Markets, said the report suggests more weakness ahead in employment.
"The downward revision of the past few months is quite worrisome, and clearly in line with our view that the economy is virtually in recession," Guatieri said.
Among various sectors, manufacturing shed 61,000 jobs and construction employment dropped by 8,000. The service sector lost 27,000 jobs.
Among the sectors gaining jobs were education (55,000) and government (17,000).
Average hourly wages rose 0.4 percent to 18.14 dollars, slightly above expectations of a 0.3 percent increase.
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