Saturday, 7 August 2004

Job growth disappoints again

Yesterday, the US Labor Department reported that the American economy added 32,000 net jobs in July, the lowest gain since December last year and well below economists' expectations of over 200,000 jobs.

The US stock market reacted by plunging yesterday, the S&P 500 coming off 16.73 points or 1.5 percent to finish the day at 1063.97. This is the second successive day that the index had fallen over one percent, the previous day's fall being the result of the increase in oil prices, which incidentally also rose yesterday.

So far, this has been an economic recovery in which job creation in the US has been largely disappointing. Overcapacity and offshore outsourcing have clearly been major drags on employment in the US.

With the US economy now decelerating, it's probably about time for economists to start moderating expectations of further payroll increases.

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