US jobs growth brakes in August, seen forcing Fed’s hand
Nonfarm payrolls increased only 96,000 last month, the Labour Department said today. While the unemployment rate dropped to 8.1 per cent from 8.3 per cent in July, it was largely due to Americans giving up the search for work.
The report’s weak tenor was also underscored by revisions to June and July data to show 41,000 fewer jobs created than previously reported. The labour force participation rate, or the per centage of Americans who either have a job or are looking for one, fell to 63.5 per cent — the lowest since September 1981.
The lacklustre report keeps the pressure on Obama ahead of the November vote in which the health of the economy looms large.
Economists polled by Reuters had expected payrolls to rise 125,000 last month, but some had pushed their forecasts higher after upbeat data yesterday.
The economy has experienced three years of growth since the 2007-09 recession, but the expansion has been grudging and the jobless rate has held above 8 per cent for more than three years — the longest stretch since the Great Depression.
Fed Chairman Ben Bernanke last week said the labor market’s stagnation was a “grave concern,” a comment that raised expectations for a further easing of monetary policy as soon as the central bank’s meeting on Wednesday and Thursday.
The jobless rate peaked at 10 per cent in October 2009, but progress reducing it stalled this year, threatening Obama’s bid for a second term. An online Reuters/Ipsos poll yesterday gave Republican Challenger Mitt Romney a 1-point edge on Obama, 45 per cent to 44 per cent.
The lack of headway putting Americans back to work has also put the question of further monetary stimulus on the table at the Fed. The central bank has held interest rates close to zero for nearly four years and pumped about US$2.3 trillion (RM7.15 trillion) into the economy through two bouts of bond buying.
The weak report makes it more likely that the Fed will launch a third round of bond purchases next week. Since the beginning of the year, job growth has averaged 139,000 per month, compared with an average monthly gain of 153,000 in 2011.
Economists blame fears of the so-called US fiscal cliff — the US$500 billion or so in expiring tax cuts and government spending reductions set to take hold at the start of next year unless Congress acts — and Europe’s long-running debt problems, for the slowdown in hiring.
Job creation last month was weak across the board, with manufacturing payrolls down 15,000, the first decline since September last year. Factory jobs were inflated in July because automobile manufacturers kept plants running when they would normally shut them for retooling, economists said.
There was little improvement in construction employment, which added 1,000 jobs. Temporary hiring fell to 4,900, declining for the first time since March.
Utilities payrolls saw a snap back, adding 8,800 after being depressed by the strike of about 9,000 workers in July.
Government payrolls declined 7,000, falling for a sixth straight month.
Average hourly earnings fell one cent last month, highlighting the underlying weakness in the labour market.
The average workweek was steady at 34.4 hours. — Reuters