US job growth misses expectations in August

Friday 06 September 2013 18.01
US jobs data disappoints despite drop in unemployment rate
US jobs data disappoints despite drop in unemployment rate

US job growth was less than expected in August and the unemployment rate dropped to a four and a half year low as workers gave up the search for work.

The new figures could delay the US Federal Reserve scaling back its massive monetary stimulus later this month.

Non-farm payrolls increased 169,000 last month, the Labor Department said today, adding to signs that third-quarter economic growth may have slowed down a bit.

The unemployment rate fell to 7.3%, the lowest since December 2008.

Economists polled by Reuters had expected job gains of 180,000 last month and for the unemployment rate to hold steady at 7.4%.

Not only was hiring less than expected last month, the job count for June and July was revised to show 74,000 fewer positions added that previously reported.

In addition, the participation rate - the share of working-age Americans who either have a job or are looking for one - dropped to its lowest level since August 1978.

The closely watched jobs report will provide a crucial piece of evidence for the Fed as it debates the future of its $85 billion per month bond-buying programme, and it will set the tone for global financial markets.

Policymakers from the Fed meet on September 17-18 and had been widely expected to turn down the dial on the purchases they have been making to keep interest rates low and boost growth.

Fed officials have made clear that they would base their decision on the progress the labour market has made since they launched their third round of quantitative easing a year ago. The US jobless rate had stood at 8.1% then.

The employment report suggested the US economy was struggling to regain momentum after stumbling early in the third quarter. Consumer spending, home building, new home sales, durable goods orders and industrial production all weakened in July. The economy grew at a 2.5% annual pace in the three months from April to June. Many economists had expected an acceleration in momentum in the second half of the year.

Today's employment report is at odds with other data that have shown signs of improvement in labour market conditions. The number of Americans filing new applications for jobless benefits is near five-year lows, while a gauge of service sector employment released yesterday hit a six-month high in August.

Other details of the employment report were mixed, with a bounce in average hourly earnings and the length of the average workweek, which slipped in July. Average hourly earnings rose five cents.

The length of the workweek rose back to an average of 34.5 hours from a six-month low of 34.4 hours in July. The drop had been blamed on employers' shifting some positions to part-time in an attempt to curb costs they might face under the Affordable Care Act.

Last month, the private sector accounted for the bulk of the job gains, but government payrolls increased 17,000. Factory employment bounced back after falling in July.

Construction payrolls were flat in August. There was a another month of strong job gains in the retail sector, while leisure and hospitality employment also posted solid increases.