Job Growth Slows in August as Labor Force Shrinks
WASHINGTON -- employers hired the fewest number of workers in eight months in August and more Americans gave up the hunt for jobs, providing a cautious Federal Reserve with more reasons to wait longer before raising interest rates.
Nonfarm payrolls increased 142,000 last month after expanding by 212,000 in July, the Labor Department said Friday. The jobless rate fell one-tenth of a percentage point to 6.1 percent, but that was partly because people dropped out of the labor force.
Data for June and July were revised to show 28,000 fewer jobs created than previously reported. In addition, manufacturing saw no job growth and retail payrolls declined for the first time since February.
%VIRTUAL-pullquote-The underlying message appears to be that the U.S. labor market recovery, which until this month appeared to have been firing on all cylinders, has hit a snag.%"The underlying message appears to be that the U.S. labor market recovery, which until this month appeared to have been firing on all cylinders, has hit a snag," said Millan Mulraine, deputy chief economist at TD Securities in New York.
The report did, however, suggest that some of the slack in the labor market was being taken up.
U.S. stocks opened down slightly, while price for U.S. Treasury debt rose and the dollar fell against a basket of currencies. Interest rate futures, which had been pointing to a likely rate hike in June of next year, rose to suggest less of a chance. However, they still showed dealers expect the Fed to bump up borrowing costs in July.
Economists had expected payrolls to increase by 225,000 in August. Many analysts said they were taking the report with a grain of salt given that it was at odds with other labor market indicators, such as first-time applications for unemployment benefits, which are hovering near their pre-recession levels.
In addition, manufacturing and service sector surveys showed strong employment growth in August and household perceptions of the labor market brightened significantly.
"The preponderance of evidence is that the economy is still gaining a lot of traction," said Russell T. Price, senior economist at Ameriprise Financial (AMP) in Troy, Michigan.
Number of Long-Term Unemployed Eases
Fed Chair Janet Yellen has expressed concern about sluggish wage growth, the still-elevated numbers of Americans working part-time even though they want full-time employment, and Americans still suffering from long spells of joblessness.
The U.S. central bank, which has held benchmark interest rates near zero since December 2008, has pointed to these metrics as evidence of "significant underutilization" of labor market resources that merits a stimulative monetary policy.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.8 percent in August from 62.9 percent in July.
But other metrics on Yellen's so-called dashboard showed improvement.
A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they can't find full-time employment fell to 12 percent, the lowest level since October 2009. The gap between that figure and the official unemployment rate narrowed, a further sign of tightening labor market conditions.
At the same time, the number of long-term unemployed Americans was the lowest since January 2009.
Average hourly earnings rose 6 cents in August, which marked an acceleration from July. Still, the year-on-year change held at 2.1 percent, which suggests little buildup of wage-related inflation pressure.
The Fed next meets on Sept. 16-17 to debate the course of monetary policy.
The private sector accounted for the bulk of the increase in payrolls in August, with the number of jobs increasing 134,000 after rising 213,000 in July. Government employment increased 8,000 as state governments hired teachers at the start of the new school year.
Manufacturing payrolls were the weakest in a year. The sector had added a hefty 28,000 jobs in July, which reflected a decision by automakers to keep assembly lines running in the summer. Auto payrolls fell 4,600, the first decline since March.
Construction employment advanced 20,000, rising for an eighth straight month. The length of the average workweek held steady at 34.5 hours for a sixth month in a row.
-With additional reporting by Herb Lash in New York.