Chinese citizen counting money amid the global economic crisis. The Chinese Premier expressed concern over the $1 trillion in US debt held by the Asian nation.
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By Krishna Guha and Sarah O’Connor in Washington Alan Rappeport and Michael Mackenzie in New York
July 2 2009 13:47 | Last updated: July 2 2009 19:29
Markets fell sharply on Thursday after a 467,000 drop in US employment for June dashed hopes that the recession in the world’s biggest economy is all but over.
Unemployment rose from 9.4 per cent to 9.5 per cent, suggesting the US is in the early phase of stabilisation. The US economy could continue to decline for months, albeit at a less precipitous rate than at the turn of the year, it shows.
The report – which came as investors were growing sceptical about the so-called “green shoots” of recovery – sent US and European shares and commodity prices tumbling.
The S&P 500 index was trading 2.2 per cent lower at midday in New York, while the FTSE Eurofirst 300 and FTSE 100 both closed down 2.5 per cent.
The yield on short-term government bills fell, indicating that the market sees less likelihood of early rate increases.
June’s worse-than-expected report followed a lower rate of job losses in May, which had raised optimism that the recession was ending and the economy might rebound faster.
“If you were banking on the US driving a vigorous recovery, think again,” said Alan Ruskin, a strategist at RBS Greenwich Capital. “The employment report can largely be taken at face value a labour market that is not improving nearly as rapidly as May data suggested.”
Calling Thursday’s jobs report “sobering news” Barack Obama, US president, said that it took several years for the country to fall into this situation and that it would take “more than a few months” to turn it around.
“I’m confident that we’re not only going to recover from this recession in the short term, but we’re going to prosper in the long term,” Mr Obama said.
Republicans seized on the data to challenge the Obama administration’s claim that its fiscal stimulus was working. Hilda Solis, labour secretary, told the FT the stimulus was saving jobs. But she added: “We are disappointed. The President and I remain deeply concerned about unemployment.”
Since the recession began in December 2007, 6.5m jobs have been lost and the unemployment rate has climbed 4.6 percentage points. Although the US has shed jobs in each of the last 18 months, the June losses mark an improvement from the first three months of the year.
But losses were widespread across industries, with only education and health adding jobs in June. The automobile and parts sector shed 27,000 jobs.
Earnings also stagnated last month, while the average work-week slipped to 33 hours, its lowest since 1964.
Copyright The Financial Times Limited 2009
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