Slowdown concerns as US job growth far less than predicted
Published 02/06/2011 | 05:00
AMERICAN companies hired far fewer workers than expected in May, adding to concerns that the US recovery is running out of steam.
Economists slashed their forecasts for tomorrow's US payrolls report, considered the best barometer of how the world's biggest economy is performing, after private-sector job growth tumbled to just 38,000, its lowest level in eight months.
Yesterday's reports were the latest sign US economic growth remained sluggish in the second quarter after hitting a soft patch in the first months of the year.
"This is all consistent with the notion we've hit a road bump when it comes to growth," said Anthony Chan, chief economist at JP Morgan Private Wealth Management in New York.
The worse-than-expected US slowdown could prompt the Federal Reserve to stick with its super-easy monetary policies. It also fuelled questions about whether the central bank might even embark on a third round of bond-buying to help prop up the economy.
Mr Chan said the weakness was unlikely to last so long as to justify the Fed launching more bond purchases, a move that would run into fierce opposition within the US Congress and from policymakers around the world, but it could force the Fed to keep interest rates low for longer.
The jobs data sent shares on Wall Street lower, with the broad S&P 500 down more than 1pc. The euro hit a fresh four-week high against the dollar, and the yield on the 10-year Treasury note fell below 3pc for the first time in nearly six months.
Goldman Sachs and several other large financial institutions cut their estimates for Friday's payrolls figure. Goldman said employers probably added 100,000 jobs in May, down from its original estimate of 150,000.
Meanwhile, the US housing market continued to struggle as a report from an industry group showed applications for home mortgages fell last week. (Reuters)