US job cuts worse than expected

Employment figures published this afternoon showed that the US economy shed 95,000 jobs in September, nearly ten times more than expected by some analysts.

Economists had predicted job losses of between 5,000 and 10,000. The source of the unexpected spike was state and local governments. Analysts had already factored in the loss of 77,000 temporary census workers but were surprised by an overall loss of 159,000 jobs in the public sector. Private sector companies added 64,000 jobs last month

The cuts were in response to budget deficits.

Mark Ostwald, strategist at Monument Securities, said: ‘The big current drag is not the private sector, it is government, and the current pace of government job losses goes well beyond the scope of temporary census workers being laid off. And one has to stress that there is no way to justify more quantitative easing as a means to stop bankrupt local (state/municipal) governments shedding jobs, let alone creating them.’

Paul Ashworth, senior US analyst at Capital Economics, said: ‘September's payroll report adds to the evidence that the recovery is losing what little forward momentum it had and will harden the resolve of the more dovish Fed officials to press forward with another round of quantitative easing.’

He added: ‘The Bureau of Labor expects to revise down the level of employment in March 2010 by 366,000. That suggests, in rough terms, that employment gains have been about 30,000 weaker a month this year than current estimates suggest.’