Markets slide on US jobs data

Fears emerged yesterday that the improvement in the US that investors were hoping would pull the world's biggest economy out of recession was at an end. Employment in June was down 467,000, compared with the 322,000 lost in May and the 363,000 forecast, and the unemployment rate rose to a new high of 9.5 per cent. The level was the highest for 26 years and global markets reacted with sharp falls.

The S&P 500 Index slumped more than 2.5 per cent in New York, as did the FTSE 100 in London. Bonds were given a shot in the arm by the data as investors decided that interest rates would not be rising in the face of a deteriorating economy.

President Obama made reference to the figures, saying that he was "deeply concerned". He added that there had been a pick up in the state of the economy but that jobs would lag that improvement. However the figures led to calls for further fiscal stimulus spending, with Speaker Nancy Pelosi lending her support to the idea. $787m was spent in the most recent spending package in February, but many commentators felt that $1tr was the minimum which should have been pumped into the economy.

WHAT THEY ARE SAYING:

Steven Ricchiuto, chief economist at Mizuho Securities, in the FT: "The Obama stimulus plan has not been able to generate the kind of momentum that will end the recession as quickly as the growth optimists had hoped."

Ian Morris, the head of US economics at HSBC, in the Independent: "The headline payroll number was awful and quite a bit worse than expectations. The euphoria over last month's smaller than expected job loss has now been well and truly dashed. We still think the official recession is or near an end, but as we have been warning, the next phase is the jobless recovery."