With modest job losses, US defies doomsayers
(Left) Immigrants rights activists and supporters make their way down Jackson Street during a May Day march on May 1, 2008 in Seattle, Washington. (Right) A file photo shows a jobseeker searching for employment opportunities in Arlington Heights, Illinois. Photo: AFP
The US labour market held up better than expected in April, with 20,000 jobs cut in the month, according to data Friday that analysts said signaled a mild economic downturn but not a calamity.
The unemployment rate, based on a separate survey, rate fell a tenth of a percentage point to 5.0 percent, the Labor Department said.
The report was better than expected by private economists, who on average had forecast a loss of 75,000 jobs and a jobless rate of 5.2 percent.
"Job losses are way below the recession norm for this point of the business cycle, if this is recession," said Robert Brusca at FAO Economics. "Many things do not really add up for the recession forecasters."
The payrolls report, seen as one of the best indicators of economic momentum, comes amid fears that the world's largest economy may be headed for recession after being battered by a horrific decline in housing and a related credit squeeze. Yet the first-quarter report on US gross domestic product showed a small increase of 0.6 percent.
Avery Shenfeld at CIBC World Markets said the data still points to economic turmoil, with job declines in key areas such as manufacturing, construction and retailing.
"The report was milder than we thought but some of the details were not quite as encouraging," he said.
"If you isolate the cyclical industries, employment is dropping quite quickly. It's still not a sign the labour market is healthy."
The report showed the economy still hurting from the housing crisis. Construction shed 61,000 jobs and manufacturing lost 46,000.
That was offset in part by a gain of 37,000 in healthcare, and 27,000 in professional and technical services. The retail sector however lost 27,000 jobs.
Shenfeld said that the sector details show problems: "When you are trying to take the temperature of the economy and where it stands in the business cycle, you look at the cyclical industries like manufacturing, construction and retail."
President George W. Bush said the report was disappointing but expressed confidence in an economic recovery.
"That's not good enough for America. It's positive growth, but we can do better than that," he said of the report during a visit to St. Louis, Missouri.
Bush said the stimulus package anchored on tax rebates will help mitigate economic weakness.
"The good news is, we anticipated this. You know, last fall we started to get indications that the economy was going to, you know, slow down," he said.
Stephen Gallagher, economist at Societe Generale in New York, argued that the report suggests a decline for the overall economy but not a meltdown.
"Overall, the modest pullback supports a mild recession or downturn for the US economy," he said. "That is not good news, but the evidence lessens the fears of a deep or prolonged downturn."
On Wednesday, the Federal Reserve cut its base lending rate by a quarter-point to 2.0 percent in a move seen as further insurance against a deep downturn after a series of aggressive rate cuts since September.
Many analysts say the Fed is likely to pause in its rate-cutting cycle to assess the impact of its earlier actions as well as the 168-billion-dollar economic stimulus package.
Peter Kretzmer, senior economist at Bank of America, said Friday's employment report "will encourage the Fed to pause in its rate cycle, allowing the aggressive easing to date to impact the economy."
Paul Ferley, economist at RBC Capital Markets, said the Fed is still cautious about a soft economy and tight credit conditions.
"Although today's report did not show as great a drop in employment as feared, it is still indicative of labour markets shedding workers during the first four months of the year," he said.
"To help sustain growth beyond this and through 2009, we are assuming that the Fed will lower Fed funds by a further 50 basis points, sending this rate to a near-term trough of 1.50 percent later this year.”
Comments