According to Reuters today, the U.S. unemployment rate unexpectedly shot up to 6.1% in August 2008 to the highest level in nearly five years, as employers cut payrolls for an eighth straight month and the decline in labour markets accelerated.
The Labour Department said today that 84,000 jobs were lost in August alone, significantly more than the 75,000 that economists who were surveyed by Reuters had forecast. In addition, July’s job losses were revised up to 60,000 and June’s to 100,000 from a previously reported 51,000 in each month.
Analysts said the bleak hiring data showed a weakening economy that likely will oblige the Federal Reserve to keep interest rates low for an extended period.
“The economy is clearly deteriorating,” said Gary Thayer, senior economist for Wachovia Securities in St. Louis. “We’re also seeing weakness around the globe so there’s less reason for the Fed to focus on inflation and more reason to focus on getting the economy back on its feet.”
Stock indexes futures extended losses but U.S. Treasury debt prices rose as investors bet it meant interest rates will remain in hold. The dollar dipped in value against other major currencies and short-term interest rate futures began to signal that the Fed could cut interest rates by year-end.
Labor department officials said the August jobless rate was the highest since September 2003. Analysts had expected the rate to remain steady at July’s 5.7 percent rate rather than to jump.
“We’re running job losses that are typically seen in the early stages of an economic recession,” said David Resler, chief economist for Nomura Securities in New York, adding, “we’re probably in one.”