US employment growth less than expected in August
By Lucia Mutikani ,ReutersWASHINGTON -- U.S. job growth was less than expected in August and the unemployment rate hit a 4-1/2 year low as Americans gave up the search for work, complicating the Federal Reserve's decision on whether to scale back its massive monetary stimulus later this month.
September 7, 2013, 12:03 am TWN
Non-farm payrolls increased by 169,000 last month, the Labor Department said on Friday, adding to signs that economic growth may have slowed a bit in the third quarter. The unemployment rate fell to 7.3 percent, the lowest since December 2008.
U.S. financial markets took the generally weak report as a sign that the Fed was less likely to make an announcement on the future of its bond buying program at its meeting this month.
The dollar fell sharply against the yen in the data, while prices for U.S. Treasury debt rallied. U.S. stock index futures rose to session highs.
“Even the Federal Reserve would conclude that the employment trend is moderating and for that reason alone they will probably have second thoughts about tapering bond purchases this month,” said Cary Leahey, senior advisor at Decision Economics in New York.
Economists polled by Reuters had expected job gains of 180,000 last month and for the unemployment rate to hold steady at 7.4 percent. Not only did hiring miss expectations last month, the job count for June and July was revised to show 74,000 fewer positions added than 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 employment report will be scrutinized by policymakers from the U.S. central bank at their meeting on Sept. 17-18. They had been widely expected to make an announcement on the future of its US$85 billion per month bond-buying program at that meeting.
Fed officials have made clear that they would base their decision on the progress the labor market has made since they launched their third round of “quantitative easing” a year ago. When they pulled the trigger, they were looking at an unemployment rate that stood at 8.1 percent.
The employment report suggested the 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-percent annual pace in the April-June period. Many economists had expected acceleration in momentum in the second half of the year.
The employment report is at odds with other data that has shown signs of improvement in labor market conditions. The number of Americans filing new applications for unemployment benefits is approaching a five-year lows. A gauge of service sector employment released on Thursday 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 in July 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 by 17,000. Factory employment bounced back after falling in July.
Construction payrolls were flat in August. There was another month of strong job gains in the retail sector, while leisure and hospitality employment also posted solid increases.