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US economic fears as hiring slows US economic fears as hiring slows
(about 1 hour later)
US employers added 18,000 jobs in December, fewer than analysts had forecast as the unemployment rate rose to 5%, Labour Department figures show. The US unemployment rate rose to a two-year high in December as hiring slowed, raising fears about a slowdown in the world's largest economy.
The pace of job creation was at its slowest since August 2003 and it was far below economists' forecasts of 70,000, and November's 115,000 figure. The US Labor Department said employers added 18,000 jobs to their payrolls, far below economists' forecasts of 70,000, and November's 115,000 figure.
The data is likely to cement concerns that the US economy is cooling sharply.The data is likely to cement concerns that the US economy is cooling sharply.
It will also raise expectations of further cuts in interest rates by the US Federal Reserve. The unemployment rate rose to 5.0%, its highest since November 2005 and up from 4.7% in November.
The data will also raise expectations of further cuts in interest rates by the US Federal Reserve.
Economic uncertaintyEconomic uncertainty
The health of the US job market is a critical factor in determining whether the economy will survive the stresses from a slump in the housing market and a squeeze on credit. The health of the US job market will in part determine whether the economy will weather a slump in the housing market and a squeeze on credit.
Businesses appear to be reluctant to add new workers given uncertainties in the economy Richard Yamarone, Argus Research
"The unemployment rate moved up in a shocking way, and that's sort of political dynamite that may make the Fed more prone to easing than otherwise," said Pierre Ellis of Decision Economics."The unemployment rate moved up in a shocking way, and that's sort of political dynamite that may make the Fed more prone to easing than otherwise," said Pierre Ellis of Decision Economics.
The unemployment rate was at its highest since November 2005 and was up from 4.7% in November. The pace of job creation was at its slowest since August 2003.
Analysts said that the poor figures could be down to a number of factors. Analysts said that the poor figures could be down to a number of factors, including poor weather.
"Businesses appear to be reluctant to add new workers given uncertainties in the economy," said Richard Yamarone of Argus Research. "Businesses appear to be reluctant to add new workers given uncertainties in the economy," said Richard Yamarone of Argus Research. "But there's also a chance the weakness was overwhelmingly due to inclement weather during the survey week. Most of the nation was iced over."
"But there's also a chance the weakness was overwhelmingly due to inclement weather during the survey week. Most of the nation was iced over." Rate outlook
The non-farm payrolls data includes both private and public sector jobs.
More jobs were created in the service sector such as healthcare, but jobs were lost in construction and manufacturing, the Labor Department said.
The data raised some expectations that the US central bank could cut interest rates by a more aggressive half a percentage point when it meets to decide monetary policy on 29-30 January.
Financial markets had been expecting the Federal Reserve to cut by a quarter point from 4.25% to 4%.