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Unemployment figures are anxiously awaited by Wall Street and the White House

WASHINGTON (AFP) - A fresh batch of US unemployment figures will on Friday provide Americans with a crucial litmus test for the sputtering economic recovery and President Barack Obama's policies.

The Labor Department will unveil its estimate of August unemployment levels, anxiously awaited by Wall Street, the White House and millions of unemployed Americans looking for signs their plight will improve.

They are likely to be disappointed.

Economists predict that the unemployment rate has risen to 9.6 percent, one tenth of a percentage point above July levels. Around 120,000 jobs are expected to have disappeared in August.

"Given the anemic pace of payroll growth... in recent months, we have been lucky that the unemployment rate has stayed at 9.5 percent, and it may be asking too much to dodge that bullet yet again in August," said Stephen Stanley of Pierpont Securities.

But this week has provided the faintest hope that the outlook may not be quite as bleak as it once seemed.

On Thursday, the Labor Department reported that the number of Americans filing new claims for jobless benefits fell faster than expected last week.

And economists have predicted Friday's numbers would show the private sector continues to create jobs, although not fast enough to offset the government releasing temporary census workers.

©AFP/Getty Images / John Moore

Economists predict the unemployment rate has risen to 9.6 percent

The fact that the economy may not plunge back into recession will offer little solace as the recovery continues at a painfully slow pace.

"The big risk for the US economy is not necessarily another round of job losses, but maintaining the 50,000 per month pace on private payrolls," said Aneta Markowska of Societe Generale.

"This falls short of the pace of labor force growth, and could cause unemployment to drift higher."

Even moderately good news will throw up challenges for the White House and the Federal Reserve, as they struggle to help the jobs market to its feet.

The White House on Thursday ruled out an "extraordinary" new economic stimulus plan to fire up the slowing recovery, but said President Barack Obama was scouting new ideas to boost jobs and growth.

But with many lawmakers fretting as elections loom and public concern mounting over the forecast 1.4 trillion dollar budget deficit, Obama's leeway is limited, shifting the spotlight onto the Federal Reserve.

The Fed's top rate-setting panel has become increasing split on why unemployment remains so high, making action even harder.

Until recently most economists have argued that firms are still rebuilding and are not yet ready to hire, but will soon.

That consensus is slowly being questioned as the jobless recovery drags despite firms regaining their fighting weight.

"The things that normally drive employment growth -- profits and production gains -- have certainly been in place during this recovery cycle," said Markowska.

Some prominent members of the Fed now ask whether high unemployment may be a structural problem, with firms being unable to find skilled workers locally.

Other members have argued that the crisis has caused businesses and American consumers to retrench, saving more and acting more cautiously than before the crisis.

"If much of unemployment is structural, then Fed can't do anything about it and shouldn't even try," Markowska said.

While that may put Obama back in the spotlight, the prospect of more government action might hamper hiring and investment, said Pierpont Securities' Stanley.

"People don't know what crazy new policy initiative might come down the pike next, they can't quantify their health care expenses, their tax rates, or the most probable regulatory stance going forward, and thus they hold off on big-ticket decisions."

©AFP / Saul Loeb

Benjamin Netanyahu (L) and Mahmud Abbas shake hands alongside Hillary Clinton

WASHINGTON (AFP) - Israeli and Palestinian leaders launched their first direct negotiations in 20 months here Thursday, agreeing to meet every two weeks in a bid to settle core differences within a year.

Israeli Prime Minister Benjamin Netanyahu and Palestinian president Mahmud Abbas vowed to hold a second round of talks on September 14-15 in the Middle East, possibly in the Egyptian Red Sea resort of Sharm el-Sheikh.

In opening some four hours of talks in Washington, US Secretary of State Hillary Clinton said she understood the "suspicion and skepticism" leading up to the meetings.

"I know the decision to sit at this table was not easy," Clinton told Abbas and Netanyahu in a chandeliered room at the State Department, joined by their delegations. "Thank you for your courage and commitment."

After Wednesday's weighty symbolism and lofty rhetoric, culminating in a White House dinner with President Barack Obama, Netanyahu and Abbas finally got down to the business end of proceedings, presenting their opening demands.

"We expect you to be prepared to recognize Israel as the nation state of the Jewish people," Netanyahu told Abbas, as the two sat on either side of Clinton with their national flags behind them.

Such a move would be politically difficult for Abbas as it could undermine the right-of-return claims of Palestinian refugees who left or fled Israel when it was created in 1948.

In the wake of two Palestinian militant attacks on settlers in the occupied West Bank, Netanyahu renewed references he had made at the White House on Wednesday to protecting Israel's security.

"A real peace must take into account the genuine security needs of Israel," he said.

Abbas appeared conciliatory, saying: "We consider security as essential and vital both for us and for you, and we will not accept that anyone commits any act that would harm your security or ours."

Focus: Real target of Hamas attacks is Palestinian negotiators

The Palestinian leader said investigations into the shootings that killed four Israeli settlers on Tuesday were progressing.

But he also stuck to his demands on settlements.

"We call on the Israeli government to move forward with its commitment to end all settlement activity and completely lift the embargo over the Gaza Strip," Abbas said.

Israel tightly controls access and egress from the Gaza Strip, which is run by the militant Hamas group, a rival of Abbas's Palestinian Authority and a fierce opponent of the peace talks.

Before going behind closed doors to begin tackling the core issues that have bedeviled past peace attempts, the two leaders poignantly shook hands, and Abbas appeared to give Netanyahu a thumbs up.

Focus: Netanyahu vows peace, but does he mean it?

©AFP/File / Tim Sloan

L-R: Hosni Mubarak, Benjamin Netanyahu, Barack Obama, Mahmud Abbas and King Abdullah II

US Middle East envoy George Mitchell described a first 90-minute meeting between him Clinton, Abbas and Netanyahu as "productive" and said the parties agreed the core issues could be settled within a year.

Netanyahu and Abbas then held a one-on-one meeting with no note-takers or translators which officials said lasted 93 minutes.

The Palestinians said Abbas had reiterated face-to-face with Netanyahu his demand that settlement construction must cease for the talks to continue.

A final meeting with both leaders, Clinton and Mitchell lasted another 18 minutes.

©AFP / Hazem Bader

An Israeli soldier aims his weapon at a flying checkpoint as troops check IDs of Palestinian drivers

Abbas and Netanyahu agreed to resume talks in two weeks and planned to meet every two weeks thereafter. Mitchell and Clinton announced their intention to be present at the future talks.

A Palestinian official said the talks on September 14-15 would take place in Sharm el-Sheikh, where negotiations have taken place in the past.

Mitchell said: "Our goal is to resolve all of the... core issues within one year. And the parties themselves have suggested and agreed that the logical way to proceed to tackle them is to try to reach a framework agreement first."

©AFP / Menahem Kahana

Israeli machinery work at the site of a new neighborhood in the Jewish settlement of Tekoa

Such an agreement is less detailed than a "full-fledged treaty" but more detailed than a declaration of principles.

Abbas had previously refused to enter direct negotiations without a full halt to Israeli settlement activity, but yielded under pressure from Obama.

The Palestinian leader is still warning that a renewal of settlement activities after September 26, when a 10-month partial moratorium expires, would end the negotiations.

The last direct peace negotiations ended in December 2008 when Israeli forces invaded Gaza to halt Hamas rocket fire on Israel.