By DPA
Washington : US firms shed jobs in August for the first time in four years, the government said, sending the stock market into a tumble as concern about US economic growth soared.
Coupled with the crisis in the US mortgage market, the loss of 4,000 jobs last month – unexpected by most economists – showed that the US expansion may be more threatened than previously believed.
In more bad news, the US Labour Department revised July’s jobs gain to 68,000, smaller than initially reported. The unemployment rate was unchanged at 4.6 percent in August.
Stocks in Europe and on Wall Street dived after the jobs report Friday. The Standard & Poor’s 500 Index was down 1.5 percent in afternoon trading in New York. Germany’s DAX index ended 2.4 percent lower on the day.
Markets have been edgy for weeks because of losses by US financial companies on home mortgages to the least credit-worthy borrowers, or subprime mortgages.
Rising interest rates have left tens of thousands of Americans unable to pay their mortgages, worsening a year-long slump in the nation’s real estate market and raising fears that consumer spending – the US economy’s engine – will suffer.
August’s downturn followed several months of slowing US job gains. US firms last cut back on employment in August 2003.
“It’s not the kind of number I’d like to see,” Treasury Secretary Henry Paulson told Bloomberg Television. “Data does not always move in a straight line, so occasionally you will find some surprises. The economy will continue to grow in the second half of the year.”
The data raised speculation that the Federal Reserve will lower the benchmark US interest rate at its Sep 18 meeting to boost the economy.
Barney Frank, a Democrat who chairs the financial services committee in the US House of Representatives, urged the Fed to set aside worries about inflation and take action.
“The notion that inflation risks outweigh the risks to output and employment growth is not supported by the evidence and a strong response is required specifically, a meaningful interest rate cut,” he said in a statement.
With the August summer holidays cutting into the job market, fewer people worked in construction, manufacturing and education than in July, the Labour Department said. Gains in services failed to offset the losses.
Since its most recent peak in September 2006, construction employment in the US was down by 96,000 in August, the report said.