In line with pessimistic “whisper” numbers, the U.S. non-farm payroll report has surprised to the downside.  Today’s results are particularly disappointing as recent economic data had previously sparked glimmers of hope that one of the worst recessions in decades may be abating.  However, now it seems that dreary days are ahead for the U.S. as a key driver for growth continues to remain under water.

According to the Labor Department, non-farm payrolls for the month of September dropped more than expected compared to expert estimates.  Previously, analysts had anticipated a decline of only 175,000.  However, the headline figure was far worse as the report showed that U.S. based companies had shed 263,000 positions in the last 30 days.  Moreover, the unemployment rate, as expected, rose to 9.8 percent (a fresh 26-year high).

This new release reinforces what Federal Reserve policy heads had stated earlier and now places concern on the sustainability of a strong economic recovery.  Last month, central bankers had noted that “economic activity has picked up”, however, overall consumption through households will likely remained subdued by “ongoing job losses” and “sluggish income growth”.

Taking a look at the reports details there is plenty of cause for concern:

• Payrolls in construction and builders continued to decline as companies in the sector shedded 64,000 jobs following a subsequent 5-digit drop.
• Service industry workers (including retailers and restaurants) saw a further drop of over 100 percent of last month’s figures.  The sector lost 147,000 workers in the last 30 days as establishments aren’t looking to carry costs into what could be a thin holiday season.
• Specifically, retailers lost almost 5 times the amount of workers since last month.

The fact that most sectors are continuing to cut positions at a heady pace builds support for the case that the national unemployment rate may actually be understating the current situation.  Just yesterday General Motors had announced that further job cuts are likely as the American icon was unable to sell off its Saturn branch.  The closing will create 13,000 in job losses and close over 300 dealerships worldwide.  This picture will place more speculation on the fact that companies in October may be headed for further cost cutting in order to boost bottom lines in the fourth quarter.

Ultimately, this morning’s release will likely boost support for a U.S. dollar turn in the mid term given the fact that it is yet another sign that the world’s largest economy may be faltering.  Consumer spending continues to lag on slow job growth and economic expansion seems to be in jeopardy considering the widening national deficits.  However, given the rather dull action in the last 24 hours, suffice it to say that the worse number will likely keep risk takers in the game with market expectations already having been met.

This entry was posted on Friday, October 2nd, 2009 at 9:46 am and is filed under Economic Indicators, US Dollar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.