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US payrolls soar past expectations to ease recession fears

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July US employment figures have come in well ahead of economists’ estimates, helping stave off fears of a new US recession, despite a small rise in the unemployment rate to 8.3%.
US payrolls soar past expectations to ease recession fears

The US added 163,000 jobs in July, according to the US Bureau of Labor Statistics, easily beating expectations of a 100,000 increase.

But that figure, the highest number in five months, was accompanied by a rise in the unemployment rate from 8.2% to 8.3%, while May and June’s disappointing employment numbers were revised down by a further 6,000 in total.

The rate has been stuck above 8% for the past two years, stifling hopes of a US economy recovery and putting pressure on president Barack Obama as he prepares for his re-election bid this November.

Equities added to earlier gains in response to the headline figures, with the FTSE 100 standing up 1.9% at 5,769, and S&P 500 futures pointing to a 1% rise to 1,379. French and German indices stood up by over 2% each, recovering ground lost yesterday.

Capital Economics’ chief US economist Paul Ashworth said the jobs gains, while promising, are not enough to rule out a third round of quantitative easing next month.

“July’s 163,000 gain in payrolls is obviously a vast improvement on what we’ve seen over the past few months. But equally it is still well short of the 250,000+ gains we were seeing at the start of this year.

“It also isn’t strong enough to drive the unemployment rate lower, which is what the Fed really wants to see. So, on balance, we doubt this would be enough to persuade the Fed to hold fire in September,” he said.

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