Lackluster Payroll Growth Probably Due to Decline in Demand

By TraderVox.com

Tradervox.com (Dublin) – Economist are projecting that the US payrolls may have grown at a slower pace in August and unemployment is likely to remain above eight percent according to a report to be released by the Labor Department on September 7. Most analysts have indicated that the slowing labor market may have prompted the Federal Reserve Chairman Ben S. Bernanke to highlight this sector as of grave concern to US policy makers when he spoke in Jackson Hole last Friday. The market is expecting 125,000 jobs to have been created in August against a job growth of 163k in July. Joblessness is expected to remain at 8.3 percent. The US economy is seen to be faltering as a separate report is set to indicate that US manufacturing was swinging between expanding and shrinking.

According to Joshua Shapiro, the Chief Economist in New York at Maria Fiorini Ramirez Inc, the slowing payrolls are only going to make it hard to bring unemployment down. He indicated that the labor demand is soggy and the US is experiencing some weaknesses in exports. In addition, the growing fiscal uncertainty will add to slow growth in Labor market. In his speech last week, the Fed Chairman Ben Bernanke indicated that the stagnation in labor market has led the policy makers to keep the monetary stimulus option on the table. He pointed out that the lower-than-expected gains in employment and consumer spending has been compounded by the global economic slowdown and growing concerns over the “US Fiscal cliff.” These factors are making it difficult for the economy to rebound and even more daunting for the labor market.

The task of boosting the job market has been exacerbated by the recent announcements from major US companies which have indicated that they would be cutting jobs to reduce their operational cost. Google Inc, on August 13, said that it would cut 4,000 employees while Lexmark International Inc, a Kentucky-based printer maker indicated that it would reduce its workforce by 1,700 globally as it projected to close one of its companies  in Philippines. These scenarios have pushed the FOMC to consider monetary stimulus as a major boost to this sector.

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