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U.S. Economy Adds 169,000 Jobs as Unemployment Rate Falls Mediocre Jobs Report Adds to Fed Speculation
(about 1 hour later)
The nation’s employers added 169,000 jobs in August, slightly below what economists were expecting. The unemployment rate ticked down to 7.3 percent from 7.4 percent, but it fell largely because people dropped out of the labor force and so were no longer counted as unemployed. A disappointing jobs report Friday raised doubts about whether the Federal Reserve will — or should — start pulling back on its stimulus program in a few weeks, as Wall Street has been expecting.
In fact, the share of working-age Americans who were either working or looking for work was at its lowest level since 1978, a time when women were less likely to be participating in the labor force. The Labor Department’s snapshot of the job market in August had several discouraging details underneath a relatively average headline number, including a large drop in the share of Americans who are either working or looking for work. This measure, known as the labor force participation rate, was at its lowest level since 1978.
The report also contained large downward revisions to job growth in July and June. August’s growth was about in line with the average hiring rate so far this year, which has been steady but mediocre. If the economy were to fill the jobs gap left by the recession within the next four years, around 300,000 jobs a month would need to be created, according to the Hamilton Project at the Brookings Institution. Earlier estimates of job growth in July and June were also revised sharply downward, and hiring over the summer months was largely driven by low-wage sectors like retail, food services and health care.
The latest numbers leave in question whether the Federal Reserve will start scaling back its stimulus measures after it meets Sept. 17-18, as Wall Street seems to expect. The Fed has been buying long-term Treasury bonds and mortgage-backed securities in order to keep long-term interest rates low, and the Fed chairman, Ben S. Bernanke, has said that the central bank will reduce the rate of those purchases “later this year.” Even so, several economists said they believe the hawks on the Fed are in control now and will find enough bright spots in this report to justify a slowing of their stimulus program after their meeting on Sept. 17-18.
Friday’s somewhat disappointing jobs report, released by the Labor Department, came on the heels of some positive economic reports that had helped reinforce Wall Street expectations that “tapering” would come in September. “There’s just barely enough in that report and in other forward-looking indicators we’ve seen to give Fed governors the confidence they need on the 18th to taper,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics, referring to a scaling back of the Fed’s monthly purchases of long-term Treasury bonds and mortgage-backed securities, which keep long-term interest rates low.
“We still expect the Fed to go ahead with the taper later this month,” said Paul Ashworth, chief United States economist at Capital Economics. But he acknowledged that the latest jobs report was “mixed bag that can be used to support an immediate tapering of the Fed’s monthly asset purchases or delaying that move until later this year.” “For the record, I don’t think they should, given the risks posed by Syria and the impending fiscal chaos in Washington,” he said, noting the expected Congressional battles over the debt limit and further austerity measures. “The costs of delaying until some of those factors are sorted out is not very great. But the Fed has given no indication it’s thinking that way.”
Health care, retail and food services were among the industries that added jobs, while payrolls fell in the information industry. Government employers, which have generally been shrinking in the last few years, added workers in August. The number of payroll jobs added in August was 169,000, close to the average pace of hiring over the last year, and the unemployment rate edged down to 7.3 percent from 7.4 percent. Unemployment fell, but only because people dropped out of the labor force and so were no longer counted as unemployed, and not because many unemployed people found jobs.
Employment gains in the recovery have been disproportionately in lower-wage sectors like food service and retail, causing concern about not only the quantity of the new jobs but also their quality. The industries are more likely to hire part-time workers and operate on just-in-time schedules, making it difficult for employees to predict how many hours they will have from week to week. But even so, the unemployment rate was already very close to the 7 percent level that the Federal Reserve chairman, Ben S. Bernanke, has said the economy would reach when the Fed ends its asset purchases altogether around the middle of next year. Mr. Bernanke has said that the Fed intends to begin reducing the monthly purchases “later this year,” widely interpreted to mean September.
“There seem to be enough people on the committee who are sufficiently enamored with the idea that that falling labor force participation is permanent that they’re probably not too worried about that factor,” Mr. Shepherdson said.
There were some bright spots in the report, however, including a tick upward in the average number of hours worked and a five-cent gain in hourly wages for private-sector workers. Over the last year, average hourly earnings have risen by 52 cents, or 2.2 percent.
“It’s not just about how many jobs, but how much people earn in those jobs,” said Doug Handler, chief United States economist for IHS Global Insight.
Still, he said, there are concerns about the quality of jobs being created. The industries driving hiring, like retail and food services, are more likely to hire part-time workers and operate on just-in-time schedules, making it difficult for employees to predict how many hours they will have from week to week.
“It’s really frustrating not knowing whether I’ll have money to pay rent and my bills,” said Charles Eden, 20, who works at a Wendy’s in St. Louis for $7.60 an hour. Last week, he had 30 hours; this week, 12. Ideally, he wants 40. “It’s really hard to find a second job not knowing whether I can work or whether I can’t work in a given week.”“It’s really frustrating not knowing whether I’ll have money to pay rent and my bills,” said Charles Eden, 20, who works at a Wendy’s in St. Louis for $7.60 an hour. Last week, he had 30 hours; this week, 12. Ideally, he wants 40. “It’s really hard to find a second job not knowing whether I can work or whether I can’t work in a given week.”
As of August, there were 7.9 million Americans who wanted to work full time but could find only part-time work. When these workers and people who want a job but have stopped looking are included, the total underemployment rate rises to 13.7 percent.As of August, there were 7.9 million Americans who wanted to work full time but could find only part-time work. When these workers and people who want a job but have stopped looking are included, the total underemployment rate rises to 13.7 percent.
The labor force participation rate remains so low partly because the population is aging and partly because workers are sitting on the sidelines as they wait for the economy to heal. Some who took shelter from the poor job market by enrolling in college and retraining programs these last few years are finally starting to cycle back into the work force, and the lucky ones are finding new opportunities. The labor force participation rate remains so low partly because the population is aging and partly because workers are sitting on the sidelines as they wait for the economy to heal. The big decline in the labor force in August was due entirely to men dropping out; the number of women in the work force actually grew.
“This suggests that much of the decline came from occupations that are male-dominated, such as construction, and that many former workers are becoming discouraged about their job prospects and dropping out of the labor force as a result,” said Mr. Handler.
Some workers who took shelter from the poor job market by enrolling in college and retraining programs these last few years — which young women have been much more likely to do than young men — are finally starting to cycle back into the work force, and the lucky ones are finding new opportunities.
“I have people call me all the time now wanting to give me a job, and I have to say, O.K., thank you, but I think I have enough jobs now,” said Jordan Douglas of Pampa, Tex., a single mother working 60 to 70 hours a week in three jobs as a registered nurse.“I have people call me all the time now wanting to give me a job, and I have to say, O.K., thank you, but I think I have enough jobs now,” said Jordan Douglas of Pampa, Tex., a single mother working 60 to 70 hours a week in three jobs as a registered nurse.
Ms. Douglas, 25, was laid off from a nursing home in February 2012 and struggled to find work. She decided to enroll in school full-time after finding a program that allowed her to continue receiving unemployment benefits while in training.Ms. Douglas, 25, was laid off from a nursing home in February 2012 and struggled to find work. She decided to enroll in school full-time after finding a program that allowed her to continue receiving unemployment benefits while in training.
“I couldn’t have been where I am today had I not gone back to school, and I couldn’t have gone back to school if I hadn’t gotten laid off,” she said. “I didn’t know it at the time, but it worked out perfectly. I have been so blessed.”“I couldn’t have been where I am today had I not gone back to school, and I couldn’t have gone back to school if I hadn’t gotten laid off,” she said. “I didn’t know it at the time, but it worked out perfectly. I have been so blessed.”