U.S. Unemployment Rate Unchanged As Economy Losses 36K Jobs
The U.S. economy lost another 36,000 jobs in February and the unemployment rate held at 9.7% according to the non-farm payroll report. Economists were forecasting a loss of 68,000 and a rise in the unemployment rate to 9.8%, as severe weather was expected to have forced some businesses to close. We may not see the impact of the crippling conditions until companies realize the impact of home bound Americans on revenue levels. A 1,000 rise in manufacturing hires is a positive sign that the sector continues to be a source of growth for the economy as a loss of 15,000 was predicted. A depressed housing market remains a drag on the labor market as the economy shed another 64,000 construction jobs. An unexpected 7.6% drop in pending home sales in January shows that the sector is struggling to sustain demand, despite the continuation of the government tax credit. Tight credit markets have made it formidable for buyers to secure the necessary funding which should continue to lead to a protracted recovery. Meanwhile, state and local governments continue to face budget shortfalls as Federal aid dries up, leading to a net government job loss of 18,000. Declining tax revenues could lead to more cuts going forward. Markets have reacted positively to the data with the USD/JPY (a proxy for risk appetite) soaring over 80 pips following the release. However, another month of job losses isn’t a glowing endorsement for the U.S. economy which was expected to have started generating sustainable job growth by this time.
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