WASHINGTON: The US unemployment rate fell to 5.1 percent in August, the lowest since early 2008, as the economy motored steadily ahead despite a global slowdown, the Labor Department said Friday.
A modest 173,000 new jobs were created last month, below what was forecast, and there were some signs that the US jobs machine was still only in second gear — wage growth remained slow, and labor force participation was still very low.
But analysts said that August data is usually sharply higher in later revisions, and that the average level of the past three months, 221,000 jobs added, showed an economy still expanding healthily despite the brake that turmoil in China is putting on the rest of the world.
“The weakness in August employment should not be over-interpreted,” said Nariman Behravesh, chief economist at economic consultancy IHS.
“The August data on jobs are often distorted by seasonal factors,” he said.
The jobless rate was at the lowest level since April 2008, when the country was plunging into recession.
The sharp one-month fall from 5.3 percent in July was helped by the Labor Department revising the job creation numbers for June and July up by a total of 44,000 positions.
Government hiring picked up in the month, to 33,000 new positions — likely mostly new teachers — but the strongest gains remained in the healthcare sector and hotels and restaurants, usually fairly low-paying positions.
The mining and manufacturing sectors meanwhile saw declines, reflecting sharp cutbacks in the oil industry due to weak crude prices, and to factories hit by China’s slowdown and the strong dollar’s impact on exports.
But the data also included a rise of 261,000 in the number of people who have dropped out of the labor force completely.
Wage gains — an important indicator for inflation — remained muted, rising eight cents an hour to an average $25.09 from July, up 2.2 percent from a year ago.
Underpinning that relative weakness was a 158,000 surge, to 6.48 million, in the number of people working part-time because they cannot find full-time positions.
And the overall workforce participation rate remained low at 62.6 percent, suggesting that the jobs market and wages are still not strong enough to pull dropouts back to the workforce. In April 2008, by comparison, the rate was 65.9 percent.
Those factors suggest possible underlying weaknesses in the economy’s momentum, said Dean Baker of the Center for Economic and Policy Research.
“There is no evidence that wage growth is accelerating and there is a real risk that employment growth is slowing,” he said.
“The big question is whether the 140,000 private-sector job growth in August is the new trend or whether it was weakened by the strong growth in prior months.”
Ian Shepherdson of Pantheon Macroeconomics downplayed those negatives. He said that for the past six years, the August figure has been revised upward by an average of 66,000 each time.
Fed rate rise in play
Nevertheless, he and others said the report was likely not strong enough to convince the Federal Reserve to begin raising interest rates at its September 16-17 policy meeting, given the external environment.
“Dig deeper and the labor market report should in fact add to rate-rise odds, but recent financial market volatility and growth jitters in China mean it would be seen by many to be a risky move to start hiking rates any time soon,” said Chris Williamson at Markit.
Currency and bond markets had mixed reactions to the report. After first jumping, the dollar fell slightly to $1.1150 against the euro.
One-year Treasury bond yields jumped to 0.36 percent from 0.34 percent before the report, but long-term yields meanwhile were lower: the 10-year Treasury fell to 2.13 percent from 2.16 percent.