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October 3, 2008
Employment figures unveiled Friday showed their biggest fall since March 2003, confirming that the latest bout of financial troubles is affecting ordinary Americans in a very real, and serious way.
"Non-farm payrolls" fell by a much worse than expected 159,000 last month, which is twice as big a fall as the previous month and also the ninth monthly drop in a row. Financial experts have now begun to suggest that the impact of Bush tax cuts is fading, and that the US economy is slipping into recession.
The US Department of Labor said that the unemployment rate remained at 6.1% or the workforce, but that further falls in non-farm payrolls are likely push it higher in the coming months. Economists are now expecting the Federal Reserve to cut another half point off its key interest rate later this month, taking it down to just 1.5%.
Experts agree that things are only likely to get worse.
William Sullivan, an economist at JVB Financial in Florida said, ""Credit market stresses are beginning to impact the labor markets. We may be dealing with even weaker job figures later this year or into 2009."
Rob Carnell of ING financial expressed similar sentiments, ""This is all further evidence of the slowdown in the real economy in the US, which even without a financial sector crisis could warrant some further Fed easing. Slowing wages growth highlights the lack of threat from inflation and inflation expectations. With the addition of financial sector turmoil, further easing looks highly probable."
And then there's Pierre Ellis of Decision Economics in NY, who predicts that the worst is yet to come: "The employment figures were weak in every important dimension. We've seen weaker data in history, but these look pretty decisively to be the beginning of something worse."
Financial markets have thus far showed little immediate reaction to the newly released data, hopeful that the House of Representative's second vote on the government's proposed $700 billion bail-out for the financial sector will be successful.
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