MercoPress. South Atlantic News Agency

US jobs data makes jittery global markets plunge sharply

Global markets fell sharply following on United States employment data which triggered wider economic prospects. The surprise 4.000 reduction in the US workforce in August sent the main Dow Jones index down 250 points to 13,113.

Analysts feared the job cuts meant that the recent market turmoil has spread to the wider US economy. European shares and UK shares fell by 2%, with London's FTSE 100 falling 122 points, while Germany's Dax lost 185 points. In Latinamerica Argentina's Merval fell 1.82%; Mexico 1.83%; Chile's IPSA 1.98%. Brazil markets were closed because of Independence Day. The August figure from the Department of Labor came as a surprise, because economists had anticipated data showing an increase of 110.000 jobs. The Department of Labor also cut its estimates for the number of new employees hired in June and July by a total of 81,000. The last time the US economy shed jobs was four years ago in August 2003 when the total number employed fell by 42,000. The figures will add to pressure on the Federal Reserve to lower interest rates. Fed chairman Ben Bernanke has stated that he is prepared to act to prevent credit difficulties sparked by the sub-prime crisis from damaging the US economy. Higher mortgage rates over the past year have meant record levels of defaults in the industry. The result has not only been significant financial difficulty for banks and investment firms heavily exposed to the sub-prime market, but also the recent stock market turmoil. This is because of fears that the crunch in the sub-prime sector will spread to the wider loans market as banks become far more cautious about whom they lend to. The situation has been exacerbated by the fact that sub-prime debt is often resold as part of a wider debt package, meaning that banks and investors are, as yet, unsure about how far the sub-prime downturn could spread.