US Job Losses

September 9, 2007


The American economy surprised many analysts(but not me) in   losing a net 4000 jobs last month according to the September 7, monthly report of the US Bureau of Labour Statistics . Unemployment remained at 4.6 % with an additional 1.4 million marginally attached members of the labour force who had looked unsuccessfully for work in the past 12 months but not in the past 4 weeks and some 392,000 discouraged workers. A total of 46,000 jobs were lost in manufacturing but largely made up by job gains in education and other services.
Analysts had been expecting a gain of 110,000 jobs overall so the result was a shocker to the markets. Stock prices fell and the expectation grew that the Fed will cut interest rates perhaps by as much as 50 basis points on September 18th when the FOMC next meets to set rates. It is clear that the sub-prime market disaster and its fallout has made the current interest rate regime unsustainable. Unless Mr. Bernanke wants the personal growth experience of riding the bear of a deep recession   as Fed chairman into the 2008 Presidential election he must cut interest rates.It may even be too late to cut the rates sufficiently to avoid a recession.

Here in Canada our central bank governor sits idly by presuming that all is well and no rate cuts are needed here. This will turn out to be a very shortsighted decision once the Fed cuts its rates. Expect the Canadian dollar to go even higher and manufacturing job losses to grow.