Poor US jobs report may see Fed hold off on tapering
US employers added far fewer workers than expected last month, suggesting a loss of momentum in the economy that is likely to add to the Federal Reserve's caution in deciding when to trim its monthly bond purchases.
Nonfarm payrolls increased 148,000, the Labour Department said yesterday. While the job count for August was revised to show more positions were created than previously reported, employment gains in July were the weakest since June last year.
Economists had expected the economy to add 180,000 jobs last month.
The US dollar slid to its weakest level in almost two years against the euro after the weak report added to speculation over a delay by the Fed in slowing the pace of stimulus. The dollar depreciated 0.4 per cent to US$1.3733 per euro in New York trading and touched US$1.3748, the weakest level since November 2011.
"This report on the labour market will soften people's assessments of current conditions," said Cary Leahey, from Decision Economics.
But there was some silver lining in the report, with the unemployment rate dropping a tenth of a percentage point to 7.2 per cent, the lowest level since November 2008.
The jobless rate is derived from a separate survey of households, which showed an increase in employment last month.
The closely watched monthly employment report was released more than two weeks later than originally scheduled because of the partial shutdown of the federal government this month.
Signs the economy lost steam even before the acrimonious budget fight could convince the Fed to hold off any decision on scaling back its bond buying until the extent of the damage from the fiscal stand-off is clear.
Economists estimate the 16-day government shutdown shaved as much as 0.6 of a percentage point off annualised fourth-quarter gross domestic product, through reduced government output and damage to both consumer and business confidence.
Fed officials will meet next week to discuss monetary policy. They surprised markets last month by sticking to their US$85 billion per month bond-buying pace, saying they wanted to see more evidence of recovery.
Both state and local governments added jobs last month, offsetting the decline in federal employment. But there was surprise weakness in the leisure and hospitality industry, which has been adding jobs consistently over the past years. The industry shed 13,000 jobs, the most since December 2009.
Additional reporting by Bloomberg