US job growth slowed down sharply in August and more Americans gave up the hunt for work, giving a cautious Federal Reserve more reasons to wait a bit longer before raising interest rates.
Non-farm payrolls increased 142,000 last month, the smallest increase in eight months, the US Labor Department said today.
The unemployment rate fell one-tenth of a percentage point to 6.1 percent as people dropped out of the labor force. June and July data were revised to show 28,000 fewer jobs created than previously reported, lending the weaker tone. In addition, manufacturing saw no job growth and retail payrolls declined for the first time since February.
Economists had expected payrolls to increase 225,000 in August and the unemployment rate to fall to 6.1 per cent. The surprise slowdown in job growth is at odds with 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, which economists said were consistent with tightening conditions. Some economists had cautioned that August’s employment report could miss expectations because of seasonal factors. An upward revision to August data is most likely.
August's employment report supports the Fed's cautious approach to monetary policy. Fed Chairman Janet Yellen is concerned 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 a long spell of joblessness. The US central bank has pointed to these metrics as evidence of "significant underutilisation" of labor market resources that merits a stimulative monetary policy.
The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.8 per cent in August from 62.9 per cent in July. However, a broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to 12.0 per cent, the lowest level since October 2009, from 12.2 per cent in July. The number of long-term unemployed Americans was the lowest since January 2009. Average hourly earnings rose 6 cents in August.
They were up 2.1 per cent from a year ago. The jobs data comes ahead of a Fed policy meeting on September 16th-17th. The central bank has kept benchmark lending rates near zero since December 2008 and financial markets do not foresee an increase until around the middle of next year. The job gains in August were spread broadly across the economy. The private sector accounted for the bulk of the increase in payrolls, advancing 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 added no jobs in August. That followed July’s hefty 28,000 jobs, which reflected a decision by automakers to keep assembly lines running in the summer.
Reuters
