Unemployment rate drops as hiring remains sluggish
The U.S. economy added 169,000 jobs in August, the Department of Labor said Friday.
Although that was an improvement from 104,000 jobs added in July, it was also slower than the average pace of job growth over the last 12 months, and missed economist expectations.
Job growth for both June and July was also revised lower by a total of 74,000 jobs.
Meanwhile, the unemployment rate fell to 7.3%, but the decline came for the wrong reasons, as 312,000 people dropped out of the labor force. Only 63.2% of Americans now participate in the labor force — meaning they have a job or are looking for one. That’s the lowest rate since August 1978.
The report was being closely watched for signs that the Federal Reserve will begin pulling back on its controversial bond-buying program later this month. The Fed has said that the timing of the “tapering” would depend heavily on improvement in the labor market.
“When they look at the full weight of evidence, they’ll conclude there’s been no significant change in the last few months,” said Jim O’Sullivan, chief U.S. economist for High Frequency Economics. “I think they will go ahead with the tapering in September.”
But economists were mixed in their reactions. And stocks rose following the report, as investors took weak job growth as a sign that the Fed may hold off on tapering until later this year.
“It would very much surprise me if they tapered at this upcoming meeting,” said J.J. Kinahan, chief strategist at TD Ameritrade. “Not only is the quality of jobs not exactly great, perhaps we’re not creating as many jobs as we think.”
Many of the jobs came in traditionally low-paying sectors, with retailers adding 44,000 jobs and restaurants and bars adding about 21,000 jobs.
Despite the housing recovery, the construction sector added no jobs overall.
Other bright spots included 33,000 jobs added in health care, 23,000 jobs added in professional services and 14,000 jobs added in manufacturing.
Overall, the trend remains the same: Modest hiring has continued at a rate of about 184,000 jobs a month for the last year, but that’s not nearly fast enough for the 11.3 million people who remain unemployed. The economy needs at least 200,000 new jobs a month just to keep pace with population growth.