The US economy shed jobs for the sixth consecutive month in July, even as the official unemployment rate dropped, according to government data yesterday that badly disappointed investors. Peronet Despeignes reports from Washington,
The Labour Department said payrolls outside the agricultural sector fell by another 44,000 in July after shrinking by 72,000 in June. Factory job losses have been particularly heavy. Payrolls have been shrinking for most of the year, although at a steadily diminishing rate.
The monthly unemployment rate fell to 6.2 per cent from 6.4 per cent - primarily because an estimated 556,000 US residents dropped out of the labour force. Jobless Americans who say they are not searching for work are not counted in the official statistics as unemployed.
The disappointing figures erased gains from the stock market's rally on Thursday and revived some betting on future Federal Reserve rate cuts.
The data also served as yet another reminder that the US remains stuck in the longest hiring drought since the second World War. Much of the nation's manufacturing base is still evaporating and unusual business caution, rapid productivity growth and sluggish demand for goods and services continues to weigh on hiring.
After the 1990-1991 recession ended, employment grew within two years. But 20 months into the current recovery, "employers are not merely continuing to cut jobs, they are cutting back on paid hours worked even more severely", said Mr Charles McMillion, chief economist of MBG Information Services, a Washington consultancy.
White House and Fed officials have predicted that employment will finally pick up but it is not clear when economic growth will achieve the 3-4 per cent annual rate considered necessary to stop unemployment rising. - (Financial Times Service)
