US jobless rate hits 26-yr high of 9.8%

US jobless rate hits 26-yr high of 9.8%

The Labour Department said non-farm payrolls dropped by 263,000, marking the 21st straight monthly decline and helping to lift the unemployment rate to a 26-year high of 9.8 per cent from 9.7 per cent in August. While the contraction in employment was worse than the 180,000 drop economists surveyed by Reuters had predicted, many believed it did not signal the start of a reversal in the trend toward stabilisation of the labor market.
Economists said September’s reading was distorted by a 53,000 drop in government employment, likely reflecting cutbacks by state and local governments, many of which are facing deep budget problems caused by the recession.

The jobless numbers might be bad news for US President Barack Obama’s attempt to reform the US healthcare system, as Congress will want to limit spending on a health sector overhaul if the economy is taking longer to recover.

While Obama’s overall approval ratings have stabilised at 50 per cent or above since August, deepening unemployment could drag them down, and polls continue to show significant opposition to his handling of healthcare. The government has put in place a $787 billion stimulus package to help the economy and the administration has hinted a second package might not be needed for now. “Friday’s job report is a sobering reminder that progress comes in fits and starts — and that we’re going to need to grind out this recovery step by step,” Obama told reporters.

The government revised job losses for July and August to show 13,000 more jobs were lost than previously reported.

A turnaround in the jobs market is viewed as the missing link in recovery from the longest and deepest slump since the Great Depression of the 1930s. The economy is believed to have started growing in the third quarter.