The United States’s labour market has roared back to life, creating twice as many jobs as expected last month, government figures showed last week, prompting speculation that the US Federal Reserve could call a halt to its policy of rockbottom interest rates.
Firms hired more workers than they sacked for the third month in a row in September, adding 126 000 employees to their payrolls, according to Labour Department figures. Unemployment fell to 6%, from 6,1% in September, the lowest level since April.
The failure of the jobs market to respond to pickup in US growth earlier this year had been a concern for the Bush administration, which is pinning its re-election strategy on a strong economy. The jobs market has been the weak link in the robust recovery, which saw the economy expand in the past quarter at its fastest pace for two decades.
With the campaign in Iraq floundering, Democrats had hoped the increased costs of the occupation and the lack of new jobs would be powerful arguments in next year’s presidential elections. ”The most likely scenario is, we’ll get enough jobs so it won’t be the issue Democrats need to oust the president,” said Mark Zandi, chief economist at Economy.com.
White House advisers said on Monday the turnaround was the result of the administration’s hefty tax cuts.
But the strong data could prompt the Federal Reserve to raise interest rates sooner than analysts had been expecting. ”If employment growth continues to accelerate in the coming months, then the first rise in rates is likely to come sooner than our current forecast of early 2005 suggests,” said Paul Ashworth, international economist at Capital Economics.
Federal Reserve chairperson Alan Greenspan struck an optimistic note about the employment outlook in a speech to the Securities Industry Association, earlier this week, saying hiring was expected to rebound.
The service sector added 143 000 new jobs last month, the largest increase in nine months. That included a 33 000 gain in temporary employment services. — Â