The US economy is slipping towards recession. Yesterday's employment report for August showed that 84,000 jobs were lost in the past month. That was largely as expected; the absolute number of employed has been shrinking all year. What surprised economists, and sent markets downwards to cap a 6 per cent fall for the S&P 500 this week, was a big jump in the unemployment rate. A combination of revisions to the number of jobs lost in June and July, with a rise in those actively looking for work, pushed the jobless rate from 5.7 per cent to 6.1 per cent, the highest in five years.

Not since 1983 has the jobs market deteriorated so rapidly. Only in April the jobless rate was 5 per cent. Furthermore, the nature of the job losses points to further declines ahead. Most categories of employment, except those insulated from the economic cycle such as government and healthcare work, saw losses. A big drop in the number of temporary workers, and a fall in overtime hours worked, suggest that companies are cutting back wherever they can.