Will the High Jobless Rate Weigh on US Recovery?

AMERICA was set to record only its second month of jobs growth in more than two years yesterday, on top of a sharp rise in monthly car sales and manufacturing output that brought welcome relief for the Obama administration.

But the economic outlook remained sluggish, with the Treasury Secretary, Timothy Geithner, cautioning that recovery would be slow and arduous as unemployment remained “unacceptably high”. Most economists tip the unemployment rate to stay above 9 per cent for the rest of the year.

Official data was expected to show that employers added up to 200,000 new jobs last month, only the second time the economy has not shed workers since the onset of the recession in late 2007.

The figure – which compares with a loss of 36,000 jobs in February – was expected to have been inflated by the temporary hiring of up to 100,000 people to help the government conduct its 2010 census.

But commentators said the result would be welcome nonetheless. “Just getting a number with six digits – over 100,000 – is, I think, very much encouraging to a lot of folks who really believe that none of this counts until we start creating jobs,” Jeffrey Kleintop, the chief market strategist at LPL Financial in Boston, told Associated Press.

Car makers – and manufacturers generally – reported a better month. Heavy discounting in the light of Toyota’s huge safety recall helped lift new car sales by 24 per cent in March to 1.07 million vehicles.

Toyota recorded a 41 per cent gain – and Lexus, its luxury brand, a 42 per cent lift – beating the local makers Ford (up 40 per cent) and General Motors (21 per cent). Chrysler Group sales fell 8.3 per cent.

Manufacturing figures also raised hopes that economic recovery was beginning to gain traction despite its minimal impact so far on employment growth, with US factory output in March growing at its fastest rate for more than five years.

The economic data spurred Wall Street higher on Thursday, with the Dow Jones index adding 70 points to 10,927 points, a year high. All key indices have climbed in the first quarter, with the Dow up more than 4 per cent this year and the broader S&P 500 index 5 per cent stronger.

The two key markers have risen by 66 per cent and 73 per cent respectively since the market’s nadir in March 2009.

The failure of this to reflect in the real economy, however, continues to concern Barack Obama and his strategists, who have been alert to signs that billions of dollars of stimulus money was beginning to lift economic activity.

Though the administration’s rescue actions undoubtedly stabilised the financial system, a Gallup poll shows a growing number of Americans (26 per cent) believe Mr Obama deserves some blame for the recession.

The sentiment adds further worry to congressional Democrats facing voters in mid-term elections in November. Mr Geithner said the administration was “very worried” about how more than 8 million jobs lost in the recession could be recovered. And he acknowledged that it appeared “deeply unfair” that some financial institutions that got taxpayer-paid bailouts were emerging in better shape from the recession than millions of ordinary Americans.

But Mr Geithner said Mr Obama had no choice but to support then-president George Bush’s bailout. The alternative would have been to “stand back” and do nothing, “and that would have been calamitous for the American economy”.

Sources: http://www.smh.com.au/business/high-jobless-rate-to-weigh-on-us-recovery-20100402-rjt2.html

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