Poor US jobs figures hit markets

The US jobs market appears weaker than originally thought

US employers added just 32,000 workers to their staff numbers last month, as far weaker employment figures than expected were revealed on Friday.

The addition to the "non-farms payroll" was the lowest this year, and smaller than the most gloomy estimate.

Markets around the world dropped on the news, while the dollar lost ground against the euro and the pound.

However, unemployment dropped to 5.5%, from 5.6% in June, its lowest level since October 2001.

"We're not satisfied," US Treasury Secretary John Snow told reporters in Pittsburgh. "We're encouraged, though, by the fact that the unemployment rate came down."

The (payrolls) number was definitely beyond any pessimist's wildest imagination Ashraf Laidi, MG Financial

The payroll figures are bad news for the world's largest economy, and for President George W Bush ahead of the presidential election in November.

They come as world stock markets are already under pressure after oil prices hit fresh record highs on Friday on fears that demand will outstrip supplies.

Crude oil prices climbed close to $45 a barrel after a fire at a major US refinery added to the catalogue of disasters undermining the market.

Estimates for new jobs in July had varied from 125,000 to 240,000, and markets around the world were stunned by the actual figure.

"This is shockingly low and that's two months in a row now, and they even revised the number down for June and May as well," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston.

'Dollar punished'

European shares dipped on Friday afternoon after the jobs data raised concerns about US economic growth.

The French Cac and German Dax both closed down by more than 2.5%, and London's FTSE 100 by 1.7%. Meanwhile, the Dow Jones and Nasdaq indexes tumbled to their lowest levels of the year..

In New York trade, the dollar was down 1.96% against the euro, which soared to $1.2279, and UK sterling rose 1% to $1.8416.

"The (payrolls) number was definitely beyond any pessimist's wildest imagination. The dollar was punished as a result," said Ashraf Laidi, chief currency analysts at MG Financial in New York.

"This really confirms that the soft patch in the US economy has become slippery for the US dollar," he added.

As well as the poor July figures, payroll growth in May and June was also revised down by a cumulative 61,000, showing a weaker jobs market than previously thought.

June was revised down to 78,000 from 112,000 and May was revised down to 208,000 from 235,000.

Election battle

The news comes as the US markets are already reeling from constantly rising oil prices, while other factors have also helped bring the Dow to a five-month low.

They include worries about world oil output capacity in the wake of terrorist attacks, and an uncertain future at troubled Russian oil giant Yukos.

Thursday's fire at a refinery in Texas came on the back of news that Russia could be back-tracking on promises to lift an asset freeze on Yukos.

Responding to news of the refinery fire, US light crude traded at $44.77 a barrel overnight on Thursday, the highest in the 21-year history of crude futures on the New York Mercantile Exchange.

And London's Brent crude reached $41.50 a barrel, a record for the contract since it started trading in 1988 on the International Petroleum Exchange.

It all adds up to unwelcome news for President Bush, who has been touting his successes as an economic leader.

Democratic challenger John Kerry has accused Mr Bush of mismanaging the economy and losing jobs to other countries, and claims the benefits of growth have not been widely distributed.