8 Sep 2008

US jobless rate at five-year high

3:32 pm on 8 September 2008

The US unemployment rate unexpectedly shot up to 6.1% in August, the highest in nearly five years.

The Labor Department said on Friday 84,000 jobs were lost in August, significantly more than the 75,000 that economists had forecast.

In addition, July's job losses were revised up to 60,000 and June is to 100,000 from a previously reported 51,000 in each month.

Analysts said the bleak hiring data showed a weakening economy that is likely to force the Federal Reserve to keep interest rates low for an extended period.

The US dollar dipped in value against other major currencies and short-term interest rate futures began to signal that the Fed could cut interest rates by year-end.

Labor department officials said the August jobless rate was the highest since September 2003. Analysts had expected the rate to remain steady at July's 5.7% rate rather than to jump.

"We're running job losses that are typically seen in the early stages of an economic recession," said David Resler, chief economist for Nomura Securities in New York, adding, "we're probably in one."

There were steep cuts in hiring in nearly every major category of employment. Some 61,000 manufacturing jobs were lost in August, the most for any month since mid 2003, and 8,000 more construction jobs were cut.

There were 53,000 jobs eliminated in professional and business services and 4,000 in leisure and hospitality industries.

A few sectors added jobs. Government payrolls increased by 17,000 in August and education and health services businesses took on another 55,000 employees.