The International Monetary Fund will confirm this week that the US economic slowdown is dragging on world economic growth.
But the growth figure in its new forecast, to be released midweek, will still be a solid 3.7% this year, compared to the earlier one of 4.1%.
The forecast comes as there’s more evidence of the extent of the slowdown in the US with the largest number of jobs lost in a month since early 2003, reported in March, and soaring bankruptcy figures for ordinary US consumers.
These factors back the IMF belief that there’s a 25% chance of a recession next year because it doesn’t expect the US to rebound strongly from the present slowdown, nor does it expect European growth to remain solid.
The IMF puts US growth at 0.5%, compared to its estimate of 1.5% in its January update.
The weaker-than-forecast jobs and a jump in the unemployment rate, will maintain pressure on the Federal Reserve to cut interest rates at its April 30 meeting.
US non-farm payrolls dropped 80,000 in March, the third consecutive month that the labour market has contracted and the steepest drop since March 2003. The market forecast was for the loss of around 50,000 jobs.
The US Bureau of Labor Statistics also revised upwards its estimate of January and February’s job losses: the figures now show the US has lost between 76,000 and 80,000 jobs every month since the start of this year and 232,000 jobs during the quarter.
The unemployment rate rose from 4.8% to 5.1% in March (after falling in February for statistical reasons).
March job losses were concentrated in construction with a loss of 51,000 jobs, manufacturing with a loss of 48,000 jobs and employment services where 41,800 jobs were lost.
Hours worked rose but the 3.6% annual rate of growth in hourly wages in the month was the smallest for two years.
Gains in government jobs prevented a larger loss in jobs than reported.
Meanwhile the rise in bankruptcy filings last month was dramatic; more than 90,000 filings in March, the highest since US insolvency laws were toughened in October 2005.
According to statistics compiled from court records by Jupiter eSources. The daily rate filings in March were 30% higher than the daily rate last year.
The states most affected by the housing recession, including California, Nevada and Florida, were among those with the largest increases in bankruptcies. They are three of the states hammered by the subprime mess.
Bloomberg points out they are also among states where unemployment rates exceeds the national average. The jobless rate in California is 5.7% and Nevada’s is 5.5%, compared to the March rate (see above) of 5.1%.
California led the way with a 42% increase in filings over the first quarter, Florida had a 35% increase and Nevada 32%.
Nevada leads the country with the highest foreclosure rate in February, California was next and Florida was third.
Business bankruptcies and reorganizations were also higher. First-quarter filings to liquidate or reorganize in Chapter 11 grew at an annual rate of 16%.
And a report from the American Banker’s Association said US consumers were falling into delinquencies on installment debt at a rate not seen since the 1992 recession.
The Association said the blame for the sudden rise in credit delinquencies related to rises in failure to pay auto loans, then overdue credit card payments. Home mortgages were excluded.
The group’s report tracked delinquencies in eight major types of ordinary installment loans, but excluded the mounting crisis in home mortgage payments.
Troubles surfaced at the start of last year and the situation worsened in all eight types of credit as the year went on.
