US Jobless Crisis!

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THE US Federal Reserve has further scaled back its Quantatitive Easing programme of free money for the US banks by another $10bn to $65bn a month.

It was originally $85bn a month. The Fed says that the whole process will be terminated by next December.

The response of banks and stock markets to the news has been widespread panic, sending the world’s stock markets crashing with share prices tumbling and interest rates soaring as speculators desperately sought value.

The Dow Jones Industrial Average plunged a further 200 points (1.2% down) at the end of trading on Wednesday.

The Fed has been pumping tens of billions of electronic dollars into the financial markets every month, in a desperate attempt to ‘stimulate’ a US economy which is $17.2 trillion in debt and about to hit its debt ceiling once more.

In a statement, the Fed said that ‘growth in economic activity picked up’ since it last met in December.

Since its last meeting, the central bank claimed it had seen ‘improvement in economic activity and labour market conditions…consistent with growing underlying strength in the broader economy’.

However, the US economy created only 74,000 jobs in December, with many Americans giving up looking for work.

The number of jobs created was the lowest for three years and was well under half the number expected by analysts.

The US unemployment rate fell to a five-year low of 6.7%, mainly due to a drop in the number of Americans looking for work as they became discouraged.

The labour force participation rate – a closely watched measure – fell noticeably. The share of Americans who are either working or looking is now 62.8%, close to 35-year lows.

The government counts people as unemployed only if they say they are actively searching for work.

The leisure, manufacturing and services sectors added jobs in December, but construction cut 16,000 jobs, the biggest drop in the industry in 20 months.

The news has led to a questioning of the programme to scale back quantitative easing, with suggestions that it will lead to an abyss for the US economy.

In the four months before December, the average number of jobs created in the US was 214,000 a month.

Meanwhile, investors have piled into assets perceived as safe havens, such as highly-rated sovereign bonds and gold.

The price of gold rose to 1241.10 dollars an ounce.