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US unemployment hits four-year low

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America's unemployment rate has fallen to the lowest level in more than four years, according to a report that will strengthen hopes for the US recovery this year. 

 

 

 By Richard Blackden

 

 

 

 

 

 

 

 

Hiring by retailers, housebuilders and professional services firms saw 236,000 jobs created in February, the Bureau of Labor said. The tally comfortably beat Wall Street's expectations of around 160,000 and is the strongest monthly showing from the labour market since November. 

 

A separate survey showed that the unemployment rate dropped to 7.7pc last month from 7.9pc in January. That is the lowest level since December 2008, when the devastating effect of the financial crisis was beginning to reverberate across the wider US economy.

 

High expectations of the Labour Department figures buoyed up European markets on Friday morning, with the FTSE 100 - whose companies generate around a quarter of their revenues in the US - reaching a fresh five-year high. 

 

The FTSE 100 continued to rise following the announcement, while Dow Jones in New York is expected to open up 0.5pc. 

 

Meanwhile the pound fell to a new two-and-a-half year low against the dollar, dipping below $1.50 to hit $1.4932 moments after the announcement, as the US dollar made gains against all major world currencies. 

 

 

Sterling plummeted against the dollar moments after the US Labor Department released figures at 1.30pm. Source: Bloomberg 

 

The resilience of America's jobs market is fuelling hopes that a recovery in the world's largest economy can withstand the cuts in government spending introduced last week. 

 

 

"February has presented an unambiguously good report," said Rob Carnell, an economist at ING. "We feel that there is a lot more good news on the unemployment rate to come in the months ahead." 

 

Investors voiced their own confidence in the recovery by sending stock markets in New York to a record high last week and pushing the FTSE above the 6,000 level. The blue-chip index held onto its gains in London after the release of the report, while futures on the Dow Jones Industrial Average suggested that markets will open higher on Wall Street. 

 

Hopes for the recovery have also been hardened by the steady, albeit slow, rise in house prices over the last 12 months. Household wealth in the US reached its highest level in five years last quarter, the Federal Reserve said this week. 

 

Despite the steady gains in jobs, the Federal Reserve remains unconvinced that the economy is strong enough to cope without the current mix of low interest rates and quantitative easing. Ben Bernanke, the Fed's chairman, has said that the stimulus will remain in place until the unemployment rate has fallen to 6.5pc. The concern at the Fed has been sharpened because further measures to tackle America's more than $16trillion of debt are expected late this year, with Democrats and Republicans only fighting over the balance between tax rises and spending cuts. 

 

The report also showed the challenge the US still faces in reducing the number of long-term unemployed. Those who have been without work for six months or more accounted for 40.2pc of all the unemployed in February, little changed from January. 

 

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