US job creation stalls in March

BBC NEWS
US job creation stalls in March
Jobs growth in the US slowed sharply in March, casting fresh doubts on the strength of the US economy.

The Department of Labor said non-farm payrolls grew 110,000 in March, having gone up by 243,000 the month before.

Many economists estimate that about 200,000 jobs need to be created each month simply to keep employment stable, given population growth.

At the same time, US consumers - the engine of the economy - lost some of their bullishness, other data showed.

The University of Michigan's closely-watched measure of consumer confidence dropped to 92.6 in March from 94.1 the previous month.

The slowing rate of job growth was the result of shrinking employment in both retail and manufacturing, while professional services and government employment grew much more slowly than in the month before.

The new figures also trimmed previous months' job growth, with February dropping almost 20,000 from the 262,000 originally estimated.

The last time the labour market expanded so slowly was in July 2004.

The participation rate - which measures how many of the working-age population are either in work or looking for it - stayed at 65.8%, the lowest figure for 17 years.

But the employment figures also showed jobless numbers fell 330,000 to 7.7 million, cutting the unemployment rate to 5.2%.

Prices

Friday's job figures are likely to revive concerns about the strength of the US economy in the face of soaring energy prices.

They could also, however, take the edge off worries about the pressure on inflation from volatile energy and food costs.

Inflation is a key concern for the US, not least because Federal Reserve chairman Alan Greenspan has identified it as key to future decisions on interest rates.

The Fed lifted rates to 2.75% in March, and some investors are betting on an acceleration of rate rises in the months to come.

US growth remains reasonably solid at 3.8% in the fourth quarter of 2004 - albeit a slowing from the breakneck pace set earlier last year.

Consumer spending, the engine of the US economy, is staying firm too with growth of 0.5% in February after a disappointing December and January.

Red ink

Many economists, however, remain concerned about the US economy's relationship with the rest of the world.

The US had a current account deficit of more than $600bn in 2004, meaning a massive gap in goods, services and investments between what the US sucks in and what it sends out.

Part of that is driven by consumers' growing demand for foreign-sourced goods and services.

It also reflects the large budget deficit, largely sustained by the buying of government debt by foreign - particularly Asian - central banks.

The deficits have been the main pressure bearing down on the US dollar, which, despite its recent recovery, is down some 25% against its main rivals since the start of the year.