U.S. Aug. nonfarm payrolls surprisingly weak, fall 4,000

WASHINGTON (AP) -- Employers sliced payrolls by 4,000 in August, the first drop in four years, a stark sign that a painful credit crunch that has unnerved Wall Street is putting a strain on the national economy.
The latest snapshot of the employment climate, released by the Labor Department on Friday, also showed that the unemployment rate held steady at 4.6 percent, mainly because hundreds of thousands of people left the work force for any number of reasons.

Job losses in construction, manufacturing, transportation and government swamped gains in education and health care, leisure and hospitality, and retail. Employment in financial services was flat. The weakness in payrolls reflected fallout from the deepening housing slump, a credit crisis and financial turbulence that has made businesses more cautious in their hiring.
The report was much weaker than economists were expecting. They were forecasting payrolls to grow by 110,000.

The drop of 4,000 jobs in August was the first decline since August 2003.
The surprisingly weak report provides the Federal Reserve with a reason to lower interest rates when it meets next on Sept. 18.
Federal Reserve Chairman Ben Bernanke, in a speech last week, said the Fed stands ready to do all that is needed to keep the credit crunch that has rocked Wall Street from damaging the economy.

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The 4,000 jobs cut in August are from both private and government employers. The government actually cut 28,000 jobs, while all private employers added 24,000.

Credit problems began with "subprime" mortgages held by people with spotty credit histories or low incomes. The problems have spread to some more creditworthy borrowers and intensified in August, unnerving Wall Street. In reaction, the Fed has pumped tens of billions of dollars into the financial system and lowered an interest rate that it charges banks for loans.
Credit is the economy's life blood. If it becomes more difficult to obtain, people might tighten their belts and companies might spend and invest less, including cutting back on hiring. That would crimp overall economic activity.

The economy, which grew at a brisk 4 percent pace in the April-to-June period, is expected to slow to half that pace in the three months from July through September. Against this backdrop, the unemployment rate is expected to creep higher, reaching close to 5 percent by the end of the year.

NEW YORK, Sept 7 (Reuters) - U.S. stock index futures fell sharply on Friday after employment data showed a surprise decline in job creation last month, suggesting the impact of mortage-market turmoil is taking a toll on the economy.

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WASHINGTON, Sept. 7 /PRNewswire-USNewswire/ -- U.S. Secretary of Labor
Elaine L. Chao issued the following statement on the August employment
situation report released today:

"After nearly four straight years of steady job growth, today's report
that employment in August was essentially unchanged reflects the challenges
currently facing the economy. This underscores the importance of continuing
the president's tax cut policies, so workers can keep more of their hard
earned wages."