The US shed a worse-than-expected 263,000 jobs last month, pushing the unemployment rate to a fresh 26-year high and raising doubts over the robustness of the economic recovery.
The payrolls data came at the end of a week of growing pessimism in the markets about the strength of the US economy. They were preceded by signs of poor consumer sentiment and disappointing data on manufacturing activity, which knocked stock prices and bond yields.
Paul Dales, US economist at Capital Economics, said that this week’s data was “a reality check to those expecting the economic recovery to be plain sailing”.
The S&P 500 index closed down 1.4 per cent on the week, which came on the back of a 2.24 per cent drop the week before. The S&P 500 – which gained nearly 15 per cent in the third quarter of the year – has not fallen for two consecutive weeks since July.
The 10-year US Treasury yield closed at 3.22 per cent, nearly 25 basis points lower than two weeks ago. The 30-year Treasury yield ended on 4 per cent, a key level. The decline in government bond yields has pushed US mortgage rates lower.
September was the 21st consecutive month that the US economy has shed jobs and the unemployment rate, which has doubled in the last two years, ticked up to 9.8 per cent. The data were worse than even the grimmest predictions.
Construction, manufacturing, retail and government agencies culled the highest numbers of workers. Only education and healthcare sectors added jobs.
In September, hourly earnings ticked up by a penny to $18.67, but the average work week – a closely watched measure that signals future hiring – slid back to 33 hours, a record low.
On Friday the Obama administration tried to head off a growing sense of impatience with the $787bn stimulus package. President Barack Obama said that he was exploring “any and all options” with advisers to expand employment.
Hilda Solis, secretary of labour, told the FT that the administration was considering new policies to create jobs. “I think we’re looking at all options right now. I can’t tell you how quickly . . . we’re trying to focus our energies to get through this.”
