Money world

The U.S. unemployment rate unexpectedly shot up to 6.1 percent in August, the highest in nearly five years, as employers cut payrolls for an eighth straight month and a decline in labor markets accelerated.

The Labor Department said on Friday 84,000 jobs were lost in August, significantly more than the 75,000 that economists surveyed by Reuters had forecast. In addition, July’s job losses were revised up to 60,000 and June’s to 100,000 from a previously reported 51,000 in each month.

Analysts said the bleak hiring data showed a weakening economy that likely will oblige the Federal Reserve to keep interest rates low for an extended period.

“The economy is clearly deteriorating,” said Gary Thayer, senior economist for Wachovia Securities in St. Louis. “We’re also seeing weakness around the globe so there’s less reason for the Fed to focus on inflation and more reason to focus on getting the economy back on its feet.”

Stock indexes futures extended losses but U.S. Treasury debt prices rose as investors bet it meant interest rates will remain in hold cashadvance.com. The dollar dipped in value against other major currencies and short-term interest rate futures began to signal that the Fed could cut interest rates by year-end.

Labor department officials said the August jobless rate was the highest since September 2003. Analysts had expected the rate to remain steady at July’s 5.7 percent rate rather than to jump.

“We’re running job losses that are typically seen in the early stages of an economic recession,” said David Resler, chief economist for Nomura Securities in New York, adding, “we’re probably in one.”

There were steep cuts in hiring in nearly every major category of employment. Some 61,000 manufacturing jobs were lost in August, the most for any month since mid 2003, and 8,000 more construction jobs were cut. There were 53,000 jobs eliminated in professional and business services and 4,000 in leisure and hospitality industries. 

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Watching Alan Greenspan in his new incarnation is a strange experience. Greenspan 1.0 served as Federal Reserve Board chairman for an entire generation, being oracular, talking in what we (and now he) called Fedspeak, rarely saying anything on the record outside of carefully choreographed public appearances.

But now we have Greenspan 2.0. He ended his 18-year run as head Fed in 2006, leaving with a rep as perhaps the best central banker in the history of money. Now, amid a worldwide financial meltdown that just won’t go away, Greenspan finds himself yapping in public and defending his record in op-ed pieces - whole new roles.

I always knew that Greenspan was capable of delivering a coherent English sentence, because although I wrote skeptically about him - or maybe because I was skeptical - I got to talk to him on the rare occasions when I felt I needed to do it quick payday. I had to agree to let him speak off the record, and found myself dealing with a superb spinmeister. He managed to influence the thinking of even a skeptic like me without having to take responsibility for what he said.

He could be extremely charming. In a briefing with some of us at Newsweek, my former employer, Greenspan went on about the first name he and I share, which his parents spelled with one "l" fewer than mine did. Talk about flattering me! Years later I discovered during a conversation with Allan Hubbard, then director of President Bush’s National Economic Council, that Greenspan had used the same Alan/

Summer job cuts have risen to their highest level in six years.

From May through August, employers nationwide announced they would cut 377,325 jobs, according to employment consultant Challenger, Gray & Christmas Inc.

That's nearly 30 percent more people than during the first four months of 2008. The last time U.S. companies announced this many layoffs was summer 2002 — in the wake of the 2001 recession.

Despite the summer climb, however, work force reduction plans tapered off in August from July, according to the Chicago company creditreports. The number of announced job cuts fell to 88,736 in August compared with 103,312 in July, but remained more than 12 percent higher than the same period last year, the report said.

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Oil was around $109 a barrel on Tuesday after sliding to five-months lows when initial reports showed Hurricane Gustav had spared major U.S. Gulf oil facilities.

U.S. crude was $109.53 a barrel by 10:44 a.m. EDT, down $5.93 from Friday’s close. It touched a session low of $105.46, its lowest since April 2.

A U.S. public holiday on Monday meant the New York Mercantile Exchange did not issue an official settlement price for U.S. crude on Monday.

London Brent crude was down 92 cents at $108.49.

As the hurricane was downgraded to a tropical storm, the market refocused on bearish factors including a softer global economy, weaker demand for oil and a stronger U.S free credit report .com. dollar.

These had already begun to drive down prices, which have dropped about $40 from a peak of $147.27 a barrel on July 11.

Hurricane Gustav, combined with Russia’s conflict with Georgia, which disrupted flows of oil and gas, had halted the slide.

“If it were not for these threats, we would have been testing $100 already,” said Mike Wittner of Societe Generale. 

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The three big credit rating agencies were shaken by a host of new regulations designed to correct shortcomings and curb their influence on investors.

But after the dust settles they most likely will continue to dominate Wall Street.

The biggest threat comes from reforms put forward by the U.S. Securities and Exchange Commission, including one to wean investors and Wall Street off the risk-assessment reports provided by Standard & Poor’s (MHP.N: Quote, Profile, Research, Stock Buzz), Moody’s Investors Service (MCO.N: Quote, Profile, Research, Stock Buzz) and Fitch Ratings (LBCP.PA: Quote, Profile, Research, Stock Buzz).

The three agencies are blamed for failing to spot the pitfalls in the mortgage securities market, contributing to massive losses for global banks and crippled credit markets.

But with SEC Chairman Christopher Cox and European Union Internal Market Commissioner Charlie McCreevy both expected to leave office early next year, analysts wonder if regulators have the time and authority to implement meaningful reforms.

“I don’t think much is going to change pay day loan. They will keep making money … because some guy in Oklahoma wants a Moody’s or S&P rating,” said Philippe Stephan, former director of product development at Moody’s KMV, a unit that assesses companies’ credit quality.

For decades, S&P, Moody’s and Fitch have dominated the landscape. Wall Street turned to them to rate their products and investors relied on them to determine the quality of companies and securities.

Now, the SEC reforms such as eliminating a requirement that money market funds hold highly rated securities means investors may turn to other avenues to evaluate a security’s credit worthiness. 

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