(Photo: Ken Osburn, The Greenville (S.C.) News)
Employers added a disappointing 169,000 jobs in August, extending a midyear dip in the labor market amid federal spending cuts and a payroll tax increase.
The unemployment rate, which is calculated from a different survey of households, fell to 7.3% from 7.4%, the Labor Department said Friday. That's the lowest since December 2008. However, the drop came because 312,000 Americans stopped working or looking for work - not because of a rise in employment.
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Even more discouraging: the Labor Department revised down its estimate for job gains in June and July by a total 74,000. The payroll increase in June was revised to 172,000 from 188,000 and in July, from 162,000 to 104,000.
Economists' consensus forecast was that 180,000 jobs were added last month. The report has been highly anticipated by investors because decent growth could persuade the Federal Reserve to begin dialing back its bond-buying stimulus at its Sept.17-18 policymaking meeting, as many economists expect.
RDQ Economics said in a research note that "the Fed will still announce a modest reduction in the pace of bond purchases" this month, but "the call is a closer one than we were expecting." TD Economics said the disappointing jobs report will prompt the Fed to "use a lighter touch" as it scales back the bond-buying.
In August, businesses added 152,000 jobs, while federal, state and local governments added 17,000. The retail and health care industries led the job gains. Average monthly job growth has slowed from 200,000 the first five months of the year to 148,000 the past three months.
"What we have is a summer slumber," says economist Joel Naroff of Naroff Economic Advisors. "It doesn't bode well for third-quarter (economic) growth." Still, Naroff expects the effects of federal spending cuts and a January payroll tax increase to fade by the fourth quarter, pushing monthly job growth back to about 200,000.
Some other signs of the job market's health were encouraging. The average workweek rose to 34.5 hours from 34.4 hours. Employers often increase the hours of existing workers before adding new ones. And average hourly earnings rose 5 cents to $24.05.
Also, the underemployment rate - which includes part-time workers who prefer full-time jobs and those who've stopped looking for work, as well as the unemployed - fell to 13.7% from 14%.
The number of temporary workers posted a modest increase of 13,000. Employers traditionally hire such short-term employees before bringing on more permanent staffers. In this recovery, however, many have added such contingent workers for extended periods and have held off on hiring permanent employees out of uncertainty.
Retailers led job gains with 44,000. Education and health services added 43,000; leisure and hospitality, 27,000; and professional and business services, 23,000. Manufacturers added 14,000 jobs, while payrolls in the construction industry were unchanged.
Reports Thursday fueled hopes for continued steady payroll advances. Initial jobless claims fell by 9,000 last week. Payroll processor ADP estimated that the private sector added 176,000 jobs last month. And a measure of service sector employment in August rose sharply.
The economy and job market are expected to gain steam late this year as the impact of the federal spending cuts fades. But another likely showdown in Washington this fall over raising the government's borrowing authority could restrain growth.