The U.S. economy lost more jobs than anticipated in September sending the unemployment rate to a 26-year high of 9.8%. Employers let go 263,000 workers, which was an increase from 201,000 in August and surpassed economists estimates for 175,000. The service sector led the decline by more than doubling last month’s total of 69,000 with a loss of 147,000. The sector which accounts for over 70% of U.S. GDP continues to feel the impact of the worst recession since WWII. An unexpected drop in government jobs by 53,000 may be evidence that the impact from the fiscal stimulus plan is dissipating. State and local agencies saw the biggest losses as they have been surviving on the help from Washington D.C. with tax receipts disappearing. Fed Chairman Ben Bernanke stated yesterday in his testimony before the House financial services committee that the current expansion may not be enough to “substantially” lower unemployment. We initially saw dollar strength following the dour report on safe haven flows. However, the greenback has given back those gains as fundamental influences are growing in importance. Fears of another global collapse have dwindled and traders may look outside the U.S. for better investment opportunities which could lead to more dollar weakness.
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