George Bush's re-election prospects received a severe setback yesterday when government figures from Washington showed the United States economy producing far fewer jobs than Wall Street had been expecting.
The 32,000 July increase in non-farm payrolls - described as "shockingly low" by one financial analyst - was almost 200,000 down on market predictions and led to a sharp sell-off in shares and the dollar.
With jobs one of the main issues in the race for the White House, analysts said the economy would have to put in an improbably strong performance between now and early November to spare Mr Bush the charge of having presided over a loss of jobs during his tenure.
"It's a huge disappointment, a big surprise," said Scott Brown, the chief economist at Raymond James in St Petersburg, Florida. "It implies a very sharp revision to the overall outlook for the economy."
John Kerry, the Democratic candidate for the White House, has been campaigning hard on the issue of the loss of more than a million jobs during Mr Bush's stewardship - particularly in the swing states of the midwest, where the labour market has been the weakest.
Mr Bush's treasury secretary, John Snow, reflected the administration's disappointment that the gain in jobs last month had failed to match Wall Street's 228,000 forecast.
"We're not satisfied," Mr Snow said after the release of data from the US labour department. He added that he still expected the economy's underlying strength to keep expansion intact during the second half of 2004.
Financial markets, already rattled by rising oil prices, responded negatively to the news on jobs and started to reconsider their view that the Federal Reserve - America's central bank - would raise rates when it meets next week.
The possibility that the Fed might leave rates on hold on Tuesday rather than raise them by a quarter-point, to 1.25%, helped to contain the market's fall.
After a fall of more than 150 points on Thursday, the Dow Jones industrial average lost a further 90 points in New York yesterday morning to trade well below the 10,000 level. The broader-based Standard & Poor's 500 and the technology-dominated Nasdaq were both at their lowest levels this year.
In London, the FTSE 100 index closed down 75.5 points at 4337.9. The dollar lost two cents against the euro and the pound, and was down 1.5% against the yen. Sterling ended the day at $1.8464.
On the oil markets, fears that the world's biggest economy might be in danger of losing momentum put a temporary halt to the rise in crude futures, which edged close to $45 a barrel on Thursday night. By lunchtime yesterday, US light crude for September delivery was trading at just over $44 a barrel, slightly down on the day, but traders warned that it might hit $50 a barrel over the coming weeks.
A refinery fire in the US coupled with the latest twist in the drama of Russian oil group Yukos added to the nervousness among oil traders.
Yukos said its production - which accounts for 2% of global crude supply - could be threatened as early as next week as a result of a Russian government collection order which will confiscate from its bank accounts the $900m required to pay next month's taxes and transportation costs.
The justice ministry's news sent Yukos shares dropping yesterday, with the price falling more than 7% in the first 15 minutes of trade on the Moscow Micex currency exchange. Shares were down more than 11% on the Russian stock market at the close of yesterday's trading.
Larry Elliott, economics editor
Saturday August 7, 2004
The Guardian
The 32,000 July increase in non-farm payrolls - described as "shockingly low" by one financial analyst - was almost 200,000 down on market predictions and led to a sharp sell-off in shares and the dollar.
With jobs one of the main issues in the race for the White House, analysts said the economy would have to put in an improbably strong performance between now and early November to spare Mr Bush the charge of having presided over a loss of jobs during his tenure.
"It's a huge disappointment, a big surprise," said Scott Brown, the chief economist at Raymond James in St Petersburg, Florida. "It implies a very sharp revision to the overall outlook for the economy."
John Kerry, the Democratic candidate for the White House, has been campaigning hard on the issue of the loss of more than a million jobs during Mr Bush's stewardship - particularly in the swing states of the midwest, where the labour market has been the weakest.
Mr Bush's treasury secretary, John Snow, reflected the administration's disappointment that the gain in jobs last month had failed to match Wall Street's 228,000 forecast.
"We're not satisfied," Mr Snow said after the release of data from the US labour department. He added that he still expected the economy's underlying strength to keep expansion intact during the second half of 2004.
Financial markets, already rattled by rising oil prices, responded negatively to the news on jobs and started to reconsider their view that the Federal Reserve - America's central bank - would raise rates when it meets next week.
The possibility that the Fed might leave rates on hold on Tuesday rather than raise them by a quarter-point, to 1.25%, helped to contain the market's fall.
After a fall of more than 150 points on Thursday, the Dow Jones industrial average lost a further 90 points in New York yesterday morning to trade well below the 10,000 level. The broader-based Standard & Poor's 500 and the technology-dominated Nasdaq were both at their lowest levels this year.
In London, the FTSE 100 index closed down 75.5 points at 4337.9. The dollar lost two cents against the euro and the pound, and was down 1.5% against the yen. Sterling ended the day at $1.8464.
On the oil markets, fears that the world's biggest economy might be in danger of losing momentum put a temporary halt to the rise in crude futures, which edged close to $45 a barrel on Thursday night. By lunchtime yesterday, US light crude for September delivery was trading at just over $44 a barrel, slightly down on the day, but traders warned that it might hit $50 a barrel over the coming weeks.
A refinery fire in the US coupled with the latest twist in the drama of Russian oil group Yukos added to the nervousness among oil traders.
Yukos said its production - which accounts for 2% of global crude supply - could be threatened as early as next week as a result of a Russian government collection order which will confiscate from its bank accounts the $900m required to pay next month's taxes and transportation costs.
The justice ministry's news sent Yukos shares dropping yesterday, with the price falling more than 7% in the first 15 minutes of trade on the Moscow Micex currency exchange. Shares were down more than 11% on the Russian stock market at the close of yesterday's trading.
Larry Elliott, economics editor
Saturday August 7, 2004
The Guardian
up if the price rises too much, and will drag the rest of us with down ya.)
