Wall Street stocks sank last night amid gloomy jobless figures that dealt a blow to President Obama’s hopes of a second term in the White House.
Official figures suggested that American employers had cut back hiring sharply amid wilting economic growth. The unemployment rate rose by 0.1 percentage points to 8.2 per cent.
The Dow Jones industrial average slumped by more than 2 per cent, dropping 240 points at one point, as traders digested Labor Department figures showing that the US generated just 69,000 new jobs in May.
The hiring numbers, the weakest in a year, will sound alarm bells in the White House as Mr Obama counts on a sustained bounce in the labour market to energise his re-election campaign. Mitt Romney, the Republican presidential challenger, called the figures “devastating news”.
The payroll numbers were well below expectations for an increase of 150,000 and came as readings for earlier months were revised down.
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The numbers follow the pattern of last year, when recovery hopes dissolved amid weaker economic data. This time, though, the euro crisis is causing deeper fears among corporations and China’s economy is showing signs of losing momentum.
Between December and February, non-farm payrolls increased on average by 252,000 per month, but for April and May the average fell to 73,000, the official figures show. The share of jobless Americans who were recorded as long-term unemployed rose to 42.8 per cent, from 41.3 per cent. The figures will revive speculation that the US Federal Reserve could re-start its quantitative easing programme. Gross domestic product climbed at a 1.9 per cent annual pace in the first quarter, weaker than the estimate of 2.2 per cent, according to figures released on Thursday.
Paul Ashworth, US economist at Capital Economics, said: “It does now appear that the global slowdown, and events in Europe particularly, are beginning to have a more marked impact on the US economy.”
The yield on ten-year US government bonds dropped below 1.5 per cent as investors fled for safe-haven assets.
Alan Krueger, chairman of the President’s Council of Economic Advisers, said: “Problems in the job market were long in the making and will not be solved overnight,” he said.