US SHEDS 159,000 JOBS

US sheds 159,000 jobs

Article from: Agence France-Presse

By Rob Lever in Washington

October 03, 2008 11:14pm

A STRUGGLING US economy lost 159,000 jobs in September as the weight of the housing collapse and credit crunch hit a broad swath of industries, government data showed today.

"There is little doubt that the nation is in a recession, which will only deepen in coming months, as the financial crisis casts a pall on economic activity," said Sophia Koropeckyj at Economy.com.

"This was much worse than was expected, as the full weight of the banking crisis, the cost of imported oil and job losses to China bore down on manufacturing and the broader economy with unrelenting pressure," said Peter Morici, economist at the University of Maryland.

The unemployment rate held at 6.1 per cent, a five-year high, the Labour Department said. The report on nonfarm payrolls, seen as one of the best indicators of economic momentum, showed a sharp rise in the number of cuts after 73,000 job losses in August. It was the ninth consecutive month of declining payrolls, according to the report, which was weaker than the average analyst forecast of a loss of 105,000 jobs.

Payrolls have fallen by 760,000 so far this year as the world's biggest economy has been roiled by a massive collapse in housing that spread to the financial sector and led to global credit crunch.

The report came as US lawmakers were debating a massive $US700-billion rescue plan for the financial system, which has been drowning in losses from the housing meltdown and keeping a tight rein on credit needed for economic growth.

The latest data showed the economy expanded at a healthy 2.8-per cent pace in the second quarter, but most analysts say the figure was misleading because of a surge in exports and the impact of a one-time government stimulus.

Over the month of September, employment continued to decline in manufacturing, construction, and retail trade, while some gains were seen in health care and mining. The manufacturing sector lost 51,000 jobs over the month, bringing the decline in factory jobs to 442,000 over the past 12 months, the report said. About 18,000 jobs were lost last month in the auto sector, which has been reeling from weak consumer spending and confidence. Some 35,000 jobs were lost in construction along with 40,000 in retail trade. The troubled financial sector shed 17,000 jobs in September, with nearly half of the decline occurring in securities and investment firms.

Overall, the report showed the financial sector has lost 172,000 jobs since December 2006. The report showed average hourly earnings rose 0.2 per cent to $US18.17, slightly below the consensus estimate of a 0.3 per cent rise. The average workweek for fell by 0.1 hour to 33.6 hours, seasonally adjusted.

"Together this means incomes are going to be crimped that will feed back to weaken spending," said Robert Brusca at FAO Economics. "And the will fed back into jobs. It is vicious circle time."