Jobs gloom hits west’s recovery hopes

[MikeWB]

Jobs gloom hits west's recovery hopes
By Krishna Guha in Washington, Alan Rappeport in New York and Stanley Pignal in Brussels
Published: January 8 2010 19:19 | Last updated: January 8 2010 19:19

Grim jobs market reports on both sides of the Atlantic on Friday highlighted the ongoing human cost of the credit crisis and kept alive concerns over the sustainability of the recovery.

In the US, news that the economy shed another 85,000 jobs in December dashed hopes that a quickening labour market turnround could add momentum to the rebound and make it more robust.


Meanwhile, eurozone data showed unemployment hit 10 per cent in November – matching the jobless rate in the US. It was the first time that eurozone unemployment has hit double digits since the introduction of the single currency a decade ago. Both the US and the eurozone economies grew in the second half of 2009. But the jobs market continues to lag behind the recovery in output, with businesses reluctant to hire.


The US figures were particularly disappointing because a relatively good November jobs report – revised up to a 4,000 job gain – and other labour market data had raised hopes of a flat or even positive month in December.

"One step forward, 85,000 steps back," said Michael Feroli, an economist at JPMorgan. About 661,000 people stopped looking for work in the US in December. If they had not done so, the unemployment rate would have gone up to roughly 10.4 per cent.

Analysts said the US economy was still likely to start generating jobs within a few months, but it would take a long time before unemployment began to decline significantly.

The US has now lost 7.2m jobs since the start of the recession, while the eurozone has lost more than 4m, despite extraordinary measures to protect labour markets by the 16 countries that use the euro.

The rise in joblessness in the eurozone was the smallest month-on-month rise, of 102,000, since July 2008. There are now 15.7m unemployed in the bloc, the highest since the current data series began in the mid-1990s. Eurozone unemployment is expected to continue rising until the middle of the year, while US unemployment is likely to stay in the 10 per cent range or tick higher between now and the summer.

"In the absence of consumer spending, the eurozone's economy is being driven by exports and destocking," said Jennifer McKeown, economist at Capital Economics.