The latest jobs figures from the US were grim as employers hired far fewer people than expected in August. Payrolls increased by just 96,000 last month.
In July the total of new posts created was 141,000. The June and July numbers were also revised downwards.
The unemployment rate – which is calculated from a separate survey of households – dropped to 8.1 percent of the working population from 8.3 percent in July, but officials said that was largely due to Americans giving up the search for work.
This is a big blow for President Obama, who is seeking re-election in November.
His Republican opponent Mitt Romney seized on the weak numbers saying: “After 43 straight months of unemployment above eight percent, President Obama hasn’t lived up to his promises.”
The White House tried to put the best possible spin on the situation.
Council of Economic Advisers Chairman Alan Krueger told CNBC: “It’s important to take a step back, take today’s report in the context of other information that is coming in. We see a pattern that the economy is continuing to heal from the very deep recession that struck at the end of 2007 and really came to a boil in 2008.”
The lack of progress in getting Americans back to work makes it more likely the US central bank, the Federal Reserve will opt for further monetary stimulus at its September 12-13 policy meeting to try to boost the sluggish economy.
Fed chairman Ben Bernanke recently said the state of the employment market was “a grave concern”.
But Republican vice presidential nominee Paul Ryan said further monetary stimulus would be a bad idea.
“All this easing is simply, in my opinion, the Federal Reserve trying to bail out bad fiscal policy,” Ryan told CNBC. “I think the costs are clearly outweighing the benefits of this.”