Belfast Telegraph

Investors braced for worst in US jobs market

By Stephen Foley

Investors are bracing themselves for another grim snapshot of the US labour market today, when the government is expected to confirm that unemployment is again on the rise.

The release of monthly US employment data has become a touchstone for global financial markets, which are looking for clues as to whether the world's largest economy might slide into a double-dip recession.

The consensus of economists' forecasts is that the US shed 80,000 jobs in August, with public-sector employment being particularly hard hit.

The overall unemployment rate is forecast to rise from 9.5% in July to 9.6% - potentially dealing a psychological blow to consumer confidence as the economy is fragile.

Yesterday, the US labour department said there were 472,000 new claimants for jobless benefits last week, 6,000 fewer than the previous week, but still higher than the average for the year to date.

Economists have been downgrading their forecasts for US GDP growth for the rest of the year and into 2011, although most believe the economy will avoid a serious second dip.

Meanwhile, US Fed chairman Ben Bernanke bluntly declared yesterday that it would have been unlawful for the US government to rescue Lehman Brothers, arguing that the Wall Street bank's finances were too weak to justify an emergency injection of public money in the run-up to its 2008 bankruptcy.

In almost three hours of testimony to America's cross-party financial crisis inquiry commission (FCIC), Mr Bernanke contradicted claims by Lehman's former boss, Dick Fuld, that the bank was a victim of an unjustified panic and a refusal by the government to step in.