Jobs data suggests US economy has ‘long road’ ahead

The world’s biggest economy faces a “long and slow grind” back to health, economists warned yesterday, as mixed United States jobs data kept the door open for continued fiscal stimulus.

The US Federal Reserve currently buys some $85 billion (£56bn) of bonds every month to keep a lid on interest rates, and it had been thought the central bank would start reining in – or “tapering” – those purchases later in the year amid signs of an economic recovery.

Fed chairman Ben Bernanke suggested last month that the monthly purchases could end as early as mid-2014.

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Labour department figures yesterday revealed that the US economy added 162,000 jobs last month, shy of the 180,000-plus expected by analysts.

The federal government also cut its previous estimates for hiring in May and June.
However, the unemployment rate managed to fall, from 7.6 per cent to 7.4 per cent – its lowest in more than four years.

Gains in employment fuelled some of that decline, but the labour force also shrank during the month.

Figures earlier this week showed the US economy expanding at a faster-than-expected annualised pace of 1.7 per cent in the second quarter. That was up from the growth rate for the first three months of 2013, which was revised downwards to 1.1 per cent from 1.8 per cent.

Gordon Charlop, of Rosenblatt Securities, described the jobs data as moderately encouraging. He said: “We’re sort of grinding along here. We’re not surging. I don’t think there’s anything here that will cause the Fed to do anything significant.”

Tanweer Akram, an economist at ING, added: “The US economy is grinding along for the better, but it’s going to be a long and slow grind.”

Alpari analyst Craig Erlam said: “All things considered, I can’t see how the Fed can seriously consider tapering in September as the recovery is far from sustainable. I am therefore still of the opinion that tapering will begin in December, at the very earliest, if not in the first quarter of 2014.”