(AFP) – Sep 6, 2008
WASHINGTON (AFP) — The jump in US unemployment to a five-year high has heightened worries about recession and puts the struggling economy into sharp focus two months ahead of the presidential vote, analysts said.
Friday's Labor Department report showed a surge in the jobless rate to 6.1 percent as 84,000 jobs were slashed in August.
As Democrat Barack Obama and Republican John McCain geared for the last two months of the presidential campaign, some economists said this report settles the debate about whether the US economy is headed for recession.
"If there was any lingering doubt, yep, it's a recession, and the fourth quarter is shaping up to be an ugly quarter," said economist Scott Anderson at Wells Fargo.
In recession, voters are likely to see a change in direction.
"The big jump in the unemployment rate in August spells trouble for the Republicans in November," says Augustine Faucher at Economy.com.
"Historically, the larger the increase in the unemployment rate, the larger the share of votes that go to the party that does not hold the presidency."
Andrew Busch, analyst at BMO Capital Markets, said the rise in joblessness "will be shouted on all the major US newspapers. This will also aid Democratic presidential candidate Barack Obama as he makes his case to change the past economic policies."
The report -- considered one of the best indicators of economic momentum -- marked the eighth consecutive month of shrinking nonfarm payrolls, and was worse than expected by private economists.
The latest figures show a cumulative loss of 605,000 US jobs since the start of 2008, highlighting the woes of the world's largest economy from a horrific housing slump and credit squeeze.
Although official data showed the US gross domestic product (GDP) grew at a robust 3.3 percent in the second quarter, many analysts say that figure was skewed by a surge in exports and helped by spending from a massive tax rebate program.
Avery Shenfeld, senior economist at CIBC World Markets, said the payrolls figure indicates a weak economy teetering close to recession.
"We are looking for the turn in economic conditions and the second quarter GDP report gave a false signal that the turn had occurred," Shenfeld said.
The White House called a jump in US unemployment figures "unwelcome," but said it was not considering a second economic stimulus package for now.
Shenfeld however said further weakening is likely in the economy.
"Without another stimulus package, the risk is that consumers pull in their horns," he said.
Robert Borosage, co-director of the left-leaning Campaign for America's Future, said the so-called "misery index" -- a term first used by Ronald Reagan in the 1980 election that adds the unemployment and inflation numbers -- is at a 17-year high.
"Honest people who work hard for a living are struggling to make ends meet," said Borosage.
"With unemployment and inflation on the rise, the misery index is important again."
Chad Stone of the nonpartisan Center on Budget and Policy Priorities said the report "shows that the economy remains mired in a slump and still waiting for something to jump start a sustainable recovery. "
Democratic Senator Sherrod Brown of Ohio said the jobless figures "underscore the dramatic failure of our current economic policies."
Obama said McCain "is intent on continuing the economic policies that just this year have caused the American economy to lose 605,000 jobs."
McCain said meanwhile the report was disappointing but cautioned against policies that could make matters worse.
"Sadly there are those who believe that to grow this economy we must raise taxes, impose costly new mandates and isolate America from the global economy," the Republican candidate said.
"When our economy is hurting, the last thing we should do is raise taxes as Barack Obama plans to do."
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