Washington, Sept 5 (Reuters): US employers cut jobs in August at the fastest pace since March, the government said in an unexpectedly grim report on Friday showing Americans are struggling to find jobs even as other areas of the economy are recovering.
The number of workers on US payrolls outside the farm sector slid 93,000 in August, the seventh consecutive month of declines, after dropping 49,000 in July. The number was far worse than the increase of 12,000 expected by economists.
A recent string of better than expected data on retail sales, durable goods, consumer sentiment and housing had led economists to believe the tough labour market might be starting to improve.
“It’s weak and the unemployment rate seems to be more of an aberration than anything else,” said Steve Gallagher, economist at SG Cowen Securities.
The unemployment rate fell, but only to 6.1 per cent from 6.2 per cent in the previous month. Analysts had expected the unemployment rate, which is taken from a separate survey of households, to be steady at 6.2 per cent.
The economy shed jobs in a wide range of sectors. Manufacturing jobs fell 44,000, the 37th straight month of decline while service jobs tumbled 67,000.
The dollar weakened sharply against other currencies after the report while US treasury bonds rose.
The labour department said the August 14 blackout, which hit the northeast United States during the survey week, probably had little impact on the numbers.
The number of worker hours was 33.6 in August, the same as in July. Analysts were expecting the average workweek to rise to 33.7 hours.
Lack of growth in the workweek is a less than encouraging sign for the future. When companies are poised to begin hiring they often increase the hours of the workers currently on their staff first.
The government said 10,000 people left the labour force, which was smaller than the drop of 556,000 in July, showing some job seekers are discouraged and abandoning their searches.
This report supports comments from Federal Reserve officials saying that interest rates are likely to be kept low for some time.
“The Fed is not about to tighten, or shift policy towards a tightening, with the labour market this weak,” said Kathleen Stephansen, director of global economist at Credit Suisse First Boston.
On Thursday, Fed governor Ben Bernanke, speaking in New York, dubbed this econo- mic recovery the“job-loss” recovery, noting that job losses have been much greater than the “job-less” recovery after the 1991 recession.
The Fed is next due to meet to discuss interest rates on September 16.