WASHINGTON, D.C.: The US economy pumped out far fewer jobs than expected in August, dimming the picture for overall growth and easing pressure on the Federal Reserve to quickly raise interest rates.
The Labor Department’s report Friday of only 142,000 net new jobs in August — compared to the 223,000 markets were expecting — broke a six-month streak of more than 200,000 a month that had cheered policymakers and job-seekers.
The department also lowered by 28,000 the number of new jobs reported for the two previous months, leaving the impression of a jobs market significantly weaker than understood over the past half-year.
Analysts were quick to note that August data is frequently volatile and possibly out of line with trends due to seasonal shifts.
And though other data has been mixed, the broader picture is of steady economic growth.
Even so, August’s jobs numbers reinforced the view that the economy is not picking up steam, and that there is little upward pressure on wages and prices that would cause a burst of inflationary.
“A disappointing employment report for August gives US policymakers more food for thought about when the economy might be capable of withstanding higher interest rates,” said economist Chris Williamson at Markit.
“The slowdown in hiring certainly vindicates the Fed’s cautious approach to tightening policy.”
Despite the lower job creation number, the jobless rate fell a tick to 6.1 percent, helped by a slight decline in the size of the labor force, and a 268,000 jump in the number of those not in the labor force.
All three data points come from the survey of households, much more volatile and inconsistent month-to-month than the establishment survey which provides the job creation numbers.
Even so, the household survey underscored the continued softness. The labor force participation rate was 62.8 percent, still very weak and virtually unchanged since April.
The total number of unemployed remained about 9.6 million and the number of people forced to work part-time because they couldn’t find full-time jobs was also only slightly lower at 7.3 million.
And nearly three million people remained in the long-term unemployed ranks, jobless for more than 27 weeks.
The establishment survey showed another key sign of slack, that workers’ situations were not changing much in terms of earnings. The average workweek remained at 34.5 hours and earnings were rising at a very modest 2.1 percent year-on-year pace.
The Federal Reserve has its ultra-low interest rate policy focused on reducing slack in the labor market.
Fed policymakers have forecast a likely first rise in its benchmark fed funds rate from the current zero level only in the second half of next year, when they expect the unemployment to be below the six percent mark.
But a growing minority of economists and policymakers, the inflation hawks, have warned that not moving earlier risks unleashing inflation that could become hard to control.
One of the Fed’s doves, Eric Rosengren, head of the Boston Federal Reserve branch, called the jobs data “somewhat disappointing,” and said it provides proof that a rate hike should not be rushed.
“Significant slack remains, and thus monetary policy needs to be patient in removing stimulus,” he said in a speech.
Most analysts said they anticipate a rebound in the jobs market in the coming months.
“We expect that payroll gains will soon return to their previous trend of 220,000 to 230,000, with some possible overshooting in the short-term,” said Harm Bandholz at UniCredit.
But Dean Baker of the Center for Economic and Policy Research said the weakness in the August jobs report was telling.
“The stronger rate in the first half of this year really was not consistent with the rate of GDP growth that we have seen recently or is generally forecast for the near future,” he said.
US Treasury yields fell on the news, but later rebounded and ended higher, with the 10 year bond moving to 2.46 percent.
Stocks also sank into losses after the announcement and then rebounded to a new record for the S&P 500, as investors took the news as a signal of continued low rates.
The S&P 500 finished up 0.5 percent while the Dow Jones Industrial Average rose 0.4 percent.