Sept. 7 (Bloomberg) -- The U.S. economy unexpectedly lost jobs in August for the first time in four years, increasing speculation that the Federal Reserve will have to reduce interest rates to counter an economic slowdown.
Employers cut 4,000 workers from payrolls, compared with a revised gain of 68,000 in July that was smaller than previously reported, the Labor Department said today in Washington. The unemployment rate held at 4.6 percent as almost 600,000 people left the workforce. Bonds rallied and the dollar weakened.
``The recession risk has certainly increased,'' said Zach Pandl, an economist at Lehman Brothers Holdings Inc. in New York. ``It definitely cements the case for a rate cut at the next Fed meeting.''
The drop in jobs is the clearest sign yet that the deepening housing recession and turmoil in credit markets are hurting the wider economy. Payrolls are one of the main indicators, along with sales, incomes and production, that help determine the start of economic contractions, and today's report may raise the odds the Fed reduces rates even before the Sept. 18 meeting of policy makers.
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