US unemployment drops to 8.2%

WASHINGTON (AFP) – US unemployment dropped unexpectedly to 8.2% in March, the lowest rate in more than 3 years, despite a mixed picture on hiring and apparent weakness in the retail sector.

Despite the positive headline number, the Labor Department reported Friday, April 6, that the number of unemployed workers hovered close to 13 million and hiring slowed, a warning sign that the recovery may be in trouble.

The economy created a meager 120,000 jobs in March, much lower than the 200,000 forecast by economists, who were left scratching their heads over the impact unseasonably warm winter and other anomalies may have had on the statistics.

Chief among them was the spectacular collapse of hiring in the retail sector, which did not seem to tally with strong sales and spending reported in the sector.

Retail trade employment fell by 34,000 in March, with most of the losses coming from large merchandise stores.

That contrasted sharply with Americans’ reporting they spent nearly 20% more in shops, restaurants, online and at petrol stations last month, according to a report from the Gallup polling organization.

Impact on Obama

Perceptions that the economy has turned a corner will be hurt by the latest figures, so too President Barack Obama’s hopes of approaching the November election buoyed by a strong recovery.

“We are making progress but there is still a long way to go,” said Gene Sperling, a key economic advisor to Obama, stressing the White House does not read too much into one month’s data, whether good or bad.

“The bottom line is that in the first 3 months of the year the economy has created 600,000 jobs,” he added.

Unemployment remains high by US standards and Obama remains vulnerable to rising gasoline prices and an external shock that would slow the recovery.

This time last year the economy had also appeared on track, but a failure by Obama and his Republican foes to reach a deal to cut spiraling US debt caused a slump in confidence.

Economists had expected the US unemployment rate to stay unchanged at 8.3%, and the economy to create some 200,000 jobs.

Weaker showing

“Today’s US employment report for March was less positive than recent reports — and much weaker than had been expected,” said Jason Schenker, president of Prestige Economics.

“Since many stock and commodity markets are closed today, the impact of this report is likely to be seen and felt on Monday [April 9],” he added.

The report did not seem to fit well with recent private-sector data on the jobs market.

On Wednesday payrolls firm ADP reported 209,000 jobs were created in March.

So Friday’s (April 6) figures will pose a headache for policymakers at the Federal Reserve, who had signaled they might slow stimulus policies as the economy improved.

The Fed’s top policy panel will next meet on April 24-25 to discuss their options.

“We do not believe this number alone is sufficient to propel the Fed into action,” said Michael Gapen at Barclays Capital.

“That said, the soft employment numbers certainly leave the door open for further accommodation.” – Rappler.com