Obama promises fresh help as US jobless rate hits 10%
Infrastructure spending and tax cuts likely as official figures show October was the 22nd consecutive month of job cuts
- guardian.co.uk, Friday 6 November 2009 18.31 GMT
- Article history
It was a turbulent day on Wall Street as jobless figures were higher than expected. Photograph: Justin Lane/EPA
Barack Obama admitted today that the rise in US unemployment above 10% last month was "sobering" as fears grew that the worst jobless figures for 26 years would push the world's biggest economy back into recession.
At the end of his toughest week since entering the White House in January, the president said he was looking at extra spending on infrastructure and tax cuts for business to safeguard America's fledgling recovery.
The poor economic news from the US sent shudders through financial markets, with gold prices reaching a record high of just over $1,100 an ounce, crude oil dropping by $2 a barrel and the dollar under pressure on the foreign exchanges.
Obama said the jobless figures underscored the challenges ahead for the American economy, which emerged from its deepest post-war downturn in the third quarter of the year.
Despite the massive US budget deficit, the president promised to provide a fresh package of fiscal measures to boost growth. The Federal Reserve pledged this week to keep monetary policy loose for "an extended period".
Monthly figures from the US department of labour revealed that employers cut a higher-than-expected 190,000 jobs in October, with the falls spread across the economy.
Among the worst-hit sectors were construction, where employers cut 62,000 jobs in October, and manufacturing, where 61,000 positions disappeared. Retail lost 40,000 jobs and in the leisure industry, payrolls were reduced by 37,000. But education, health and professional services showed an increase in employment.
The unemployment rate – which stood at 6.6% last October – increased from September's 9.8% to 10.2%, reaching its highest level since April 1983, a period when the Federal Reserve was using high interest rates to squeeze out inflation.
Wall Street forecasters had expected job losses of closer to 175,000 and were hoping that the percentage rate of unemployment would remain in single figures. Nigel Gault, chief US economist at IHS Global Insight, described the unemployment rate as a "horrible number".
"People were hoping there would be an upside surprise to this," said Gault. "What's happened is it's come out worse, so that's caught them on the wrong foot. They were leaning one way, and it's gone the other. Remember, we had a huge run-up in the market yesterday, a lot of optimism. So this throws a bit of cold water on that."
David Resler, senior economist at Nomura Securities in New York, described the double-digit jobless rate as "really quite disheartening" and said he did not foresee any move by the Federal Reserve to raise interest rates for some time: "We don't see the Fed doing anything before the early part of 2011, and this simply reinforces that point."
October was the 22nd consecutive month of job cuts in the US economy. The ongoing loss of employment comes despite a $775bn (£468bn) economic stimulus package by Obama in an attempt to kick-start activity, including the creation of work through public projects.
Scott Paul, executive director of the Alliance for American Manufacturing, said: "No end is in sight for rising unemployment, which is grim news for American workers. Manufacturing must be the jobs engine that drives us out of the recession, but Washington is sitting on its hands while China and our other competitors in Asia and Europe invest heavily in clean energy and revitalising their industrial sectors.
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