FEDERAL Reserve chairman Ben Bernanke faced a fiscal headache last night after fewer Americans than expected found work last month, while many gave up altogether on the search for a job.
The closely-watched “non-farm payrolls” data comes ahead of a crucial Fed meeting later this month at which policymakers had been widely expected to begin cutting stimulus measures.
Analysts said yesterday that so-called “tapering” process was likely to be pushed back as the recovery in the world’s biggest economy shows signs of stalling.
The United States labour department figures revealed 169,000 jobs were added in August, short of Wall Street expectations. While the unemployment rate fell to 7.3 per cent from 7.4 per cent, officials said this was because more people stopped searching for work.
Critically, the overall job count for June and July was revised downwards to show 74,000 fewer positions added than previously reported.
Markets took the report as a sign the Fed was less likely to make an announcement on the future of its massive bond-buying programme at its meeting on 17-18 September.
Alpari UK analyst Craig Erlam said: “If there’s one thing worse than the unemployment rate remaining stubbornly high, it’s surely the rate dropping because people are giving up looking for work. The Fed will be fully aware of this at the meeting in September, which will surely make it difficult to justify tapering, given an aim of QE3 [quantitative easing] was to bring about a sustainable improvement in the labour market.”
He added: “The Fed should not, and probably won’t, taper in September, especially with a potential conflict in Syria pushing up oil prices which will further weigh on the fragile economy.”
Cary Leahey at Decision Economics added: “Even the Federal Reserve would conclude that the employment trend is moderating and, for that reason alone, they probably will have second thoughts about tapering bond purchases this month.”
The jobs numbers came just hours after news of flat UK industrial output and a marked deterioration in Britain’s trade balance took some of the shine off recent strong economic data closer to home.
Output in the industrial sector – which accounts for about a sixth of UK gross domestic product – had been expected to edge up by 0.1 per cent in July.
The narrower measure of manufacturing, which excludes energy production, rose by 0.2 per cent, again shy of forecasts.
Separate figures from the Office for National Statistics showed the deficit in goods increased from £8.2 billion to £9.9bn, a 9.3 per cent fall in exports excluding oil compared to June.
David Kern, chief economist at the British Chambers of Commerce, said: “The larger-than-anticipated increase in the trade deficit is a reminder of the obstacles facing the UK economy as it starts to recover.”