American job data may prompt second round of QE, economist says

Mass lay-offs by America’s public sector employers sent the non-farm payrolls index down in September, increasing the chance of more quantitative easing (QE).

Jeremy Cook
Jeremy Cook

According to the US Bureau of Labor Statistics, government employment fell by 159,000 jobs. This reflects both a drop in the number of temporary jobs for Census 2010 and job losses in the local government.

Meanwhile, private sector payroll employment continued its upwards trend with a rise of 64,000 jobs.

The unemployment rate remained unchanged at 9.6%. America hoped that hiring by private sector firms might have compensated for private sector weakness, but this did not happen. (article continues below)

The figures sent the dollar plunging against the pound as traders anticipated a further deterioration in the American economy. Concerns that the Federal Reserve will be forced to increase its programme of quantitative easing have already triggered a flight away from the dollar to safer havens, mainly the euro and the yen.

Jeremy Cook, chief economist at World First, says that weak American job data makes a fresh round of quantitative easing more likely.

Cook (pictured) says: “There’s only one word for this result: ugly. The market has taken this figure and is almost insisting on a second round of monetary policy easing from the Fed in November as a result.”

He says the second round of QE is is “definitely on the slipway at the moment”.