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Shock US unemployment jump raises warning flags |
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Sunday, 08 June 2008 |
Agence France-Presse
First Posted 05:47:00 06/07/2008
WASHINGTON — US unemployment in May unexpectedly surged by the strongest increase in two decades, Department of Labor data showed Friday, raising warning flags that the economy is headed in the wrong direction.
A shock half-point jump in the unemployment rate to 5.5 percent from 5.0 percent in April left analysts divided over whether the huge increase in the number of people seeking jobs is a sign of recession or a statistical fluke.
The stark increase made it more likely the Federal Reserve will forego hiking interest rates anytime soon, despite building inflationary pressures from spiraling energy and food prices, analysts said.
Most economists had expected a sharply lower unemployment rate of 5.1 percent. The increase was the largest monthly change since February 1986; the last time the rate rose by more than 0.5 percentage point was in May 1980, when it climbed 0.6 point.
The dire headline number contrasted with a payrolls report from the labor department showing 49,000 jobs had been shed, compared with the consensus forecast of 60,000.
Jobs continued to be lost in construction, manufacturing, retail trade and temporary help services, the department said, while health care continued to add jobs.
The labor department also downwardly revised March and April payrolls by 15,000, for a cumulative two-month total of 116,000 jobs lost.
The economy has now lost 324,000 jobs over the last five months, and May was the first time since June 2003 that the economy lost jobs for five straight months as the world's largest economy struggles with a severe housing slump, tight credit and skyrocketing energy prices.
The official unemployment rate, taken from a separate survey of households, includes workers who are actively seeking a job and can rise as jobless workers who had given up on looking for new work then begin searching again.
Philip Rones, deputy commissioner at the Bureau of Labor Statistics, cautioned against reading too much into the one-month unemployment rate gain. "I would note that large over-the-month changes in seasonally adjusted estimates from the household survey can occur between April and July," he said.
Ongoing job losses have prompted many economists to say the US is in the midst of a recession, although others have said far more jobs—100,000 or more—are normally lost each month during a recession.
Some analysts said the payrolls data, derived from a survey of companies, were a better indicator of the health of the labor market in May than the headline unemployment data, which reflected an unusual expansion in the number of people actively seeking work.
The May job losses were "relatively benign" and "not at a recession level," said Scott Brown, an analyst at Raymond James.
Analysts however puzzled over the bold jump in the unemployment rate.
The size of the labor force "went up quite dramatically" perhaps because of seasonal adjustments, like college students seeking summer jobs, Brown said.
Stephen Wieting of Citigroup noted that the labor force has increased by 1.2 million people, but he said there is "no way to tell exactly" whether the increased workforce is mostly students.
John Lonski at Moody's said the report shows "some slack on the job market, which has adverse implications for consumer spending," the main driver of US economic activity. "It is a mistake to rule out the presence of a mild recession in the US economy despite some better than expected indicators from other parts of the economy," he said.
Robert MacIntosh at Eaton Vance said the market expects the Fed to raise interest rates by a quarter-point twice by the end of the year, probably beginning in the fall.
However, the May unemployment rate increase makes it even more likely the Fed will “do nothing for longer,” he said. |
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Dollar steady in Asian trade with revised higher US growth |
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Saturday, 31 May 2008 |
Agence France-Presse
First Posted 12:06:00 05/30/2008
THE DOLLAR held steady against other major currencies Friday, propped up by an upward revision to US economic growth figures and a batch of soft Japanese data, traders said.
The dollar was changing hands at 105.70 yen in Tokyo morning trade, up from 105.52 yen in New York late Thursday.
The euro was at $1.5510, compared with $1.5503 in New York, while edging up to 163.88 yen from 163.78.
"The dollar retained its firm tone from New York," said Kenichi Yumoto, vice president of foreign exchange trading at Societe Generale in Tokyo.
The greenback got a boost in New York after first-quarter US growth was revised to a 0.9 percent annual pace from the initial estimate of 0.6 percent.
"We don't see any fresh factor in Tokyo that could reverse the momentum from New York," Yumoto said.
The US unit also was underpinned by weaker crude oil prices and a mixed report on economic confidence in the 15-nation eurozone.
Dealers said the latest US data suggested the chances of another US Federal Reserve interest rate cut in the near future were very slight, and this supported the dollar, which has suffered against the euro because of a large yield differential.
But the currency market looks likely to be "more sensitive to good news from the euro area and bad news from the US over the near term," Barclays Capital analysts wrote in a research note.
"We also think that the actual data could be in favour of the euro area relative to the US," they added.
Analysts noted that US central bank officials have been sounding a hard line on inflation, citing Dallas Fed President Richard Fisher who said it would be "unacceptable" for the Fed to be viewed as accepting higher prices.
The greenback also benefitted from a series of sluggish economic data in Japan, including drops in factory output and consumer spending and a rise in unemployment.
"The data were worse than expected," weighing on the yen slightly, Yumoto said. |
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