How The US Economy Was Headed For A Slowdown Last Quarter?

If the Chairman of the US Federal Reserve is to be believed, the US economy side by side with forex industry is close to faltering and the impact of the Euro debt crisis, especially if the Greek debt situation is not appropriately addressed, could be considerable on the US economy and forex trading market. Even though US banks do not have substantial exposure to the Euro debt crisis, the US stock markets are feeling the heat of the crisis, which in turn reduces the wealth of Americans and impacts the purchasing power of consumers. Thus, if the Euro debt situation is not carefully handled, the consequences on the US economy could be considerable. Further, the US Fed chief added that the central bank was ready to undertake more steps to revive the economy, but asked for government not to curtail its fiscal spending just as yet. The government seems to be worried about rising long term fiscal deficit and wants to cap it before it becomes unmanageable. The Fed is of the view that inflationary pressures are under control, which make it possible to maneuver monetary policy instruments to stimulate the economy.

To add cheer to the almost all pervasive economic gloom, the US economy added more jobs than projected in September allaying fears that job creation had come to a grinding halt. As per the Labor Department, the US added 103000 private sector jobs in the month of September. The additional cheer came from the revision of the employment data for July and August. The numbers for both the months were revised upwards suggesting that 57000 jobs were added in August and 127000 in July. As per earlier estimates there was no jobs added in the month of August. However the addition of 137000 jobs for September was on the back of a 45000 increase due to employees returning to their jobs at Verizon due to the ending of a workers strike. While, such an increase helps pepper the overall numbers, in reality it is not an increase. Even with the increase in jobs in September, the US unemployment rate is stubbornly high over 9%, something that needs to come down drastically to give the US economy a gentle push.

A closer analysis of the jobs growth reveals that the jobs addition was spread across various sectors of the economy. While, this is a good sign, hopefully the jobs addition should be sustainable and lead the US economy out of the doldrums. Employment in the services sector grew by about 48000 in September. 26000 was the addition in the construction sector suggesting that construction activity may be at the verge of picking up. Health care added 18000 jobs and information industry added about 34000 jobs. However, employment in manufacturing and government sector declined making the employment growth trend a mixed bag with some gains and some losses.

Overall, while the US economy seems to be stagnating, the recent gains on the jobs front suggests that there is still hope and the right stimulus from the government could help make the gains stronger and help the economy get on a sustainable growth path.

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