US jobs data puts markets on recession alert

An outdoor job fair in South Los Angeles. Markets fear that the US economy is sliding back into recession. Photograph: Robyn Beck/AFP/Getty Images

Fears are mounting that key US unemployment data will show the world's biggest economy is teetering on the brink of re-entering recession.

US non-farm payroll data – due out at lunchtime on Friday – is expected to show an increase of about 60,000 jobs in August, far below a 117,000 increase in July. Economists at Goldman Sachs warned investors on Thursday that they expect an increase of just 25,000 jobs, compared with an earlier estimate of 50,000. There have even been suggestions that the figure could be negative, which would send further shockwaves through global markets.

Reflecting those fears, gold, the traditional safe haven in troubled times, jumped more than 1% to $1853.

The expected slowdown in job creation is worrying because the US generally needs to add about 150,000 jobs each month just to keep up with the growth in the working-age population.

Fears about jobs and the overall health of the US economy pushed down markets across the world, with the FTSE 100 down 87 points to 5330, a fall of 1.6%.

Tim Schroeders, who helps manage $1bn of equities at Pengana Capital in Australia said: "The US recovery remains anaemic, with lingering concerns over job creation and house prices. Expectations are relatively low for tonight's jobs data."

Ben Potter, market strategist at IG Markets, said traders were suffering with "classic nervousness" ahead of the jobs data. "As it stands, the market is expecting a figure of around 70,000 jobs. However, the whisper numbers have been as low as zero," he said. "So an inline result could see the market move higher."

Michael Hewson, market analyst at CMC Markets, said: "At the beginning of the week expectations were for a number of around 90,000, but as the week has progressed subsequent revisions have moved the bar lower.Thursday's Institute for Supply Management [ISM] manufacturing number gave the markets a brief boost after the headline figure remained in expansion territory against expectations, however after scratching a little below the surface the picture wasn't as rosy as first appeared with new orders contracting at 49.6, and construction spending for July falling back by 1.3% much more than expected.

There now remains a concern in some quarters that Friday's number could well be negative, which would be a shock and certainly give the Fed and the markets food for thought. In any case the consensus has now moved to between 25,000 and 65,000, with the unemployment rate staying at 9.1%."

Clash with Boehner

President Obama is due to unveil his plan to tackle unemployment and revive the economy next week – but only after settling a diary clash battle with John Boehner, the Republican speaker of the House of Representatives.

White House officials had asked Boehner if the president could address a joint session of Congress next Wednesday. Normally, such a request for a big set-piece speech would have been granted automatically. However, growing political friction in Washington led Boehner to deny the request. Boehner said the speech would have clashed with a series of already scheduled votes. But many political experts say the real reason was because it clashed with the next Republican presidential debate.

Obama has been forced to delay his speech until next Thursday when he will arguably be up against even tougher competition: the nationally televised opening game of the new NFL season featuring the defending Super Bowl champions, the Green Bay Packers.

The FTSE 100 index was down 1% to 5357 at 8am, with only two companies – Inmarsat and Rangold Resources – in positive territory. Banks were among the biggest fallers today, with RBS down more than 3%, at 25.42p and Barclays 3% lower at 175p.

The decline in the FTSE was mirrored by similar falls across Europe and Asia, with Japan's Nikkei falling back below the 9,000 points level after six straight days of gains. In the US the S&P 500 is forecast to open 0.5% down.