WASHINGTON — Slower than expected jobs growth in August is likely to weigh on the U.S. central bank’s decision to scale back its monetary stimulus program. U.S. unemployment fell to 7.3 percent in August, the lowest in nearly five years. The Bureau of Labor Statistics says even though 169,000 jobs were added in August, fewer jobs were added in June and July than previously thought.
U.S. companies are still hiring, but they’re adding new jobs at a slower pace than many had hoped.
Cary Leahy at Decision Economics said the job market is the weakest it’s been in 12 months. “Momentum has really slipped. Four months ago the average job gain over three months was 200,000 workers per month. It's fallen to 150,000.”
The good news is that unemployment is now at pre-recession levels. The bad news is more Americans have given up looking for work.
Robert Bixby at the Concord Coalition said that’s especially true for those who have been unemployed six months or longer.
“One of the most troubling aspects is not just the number of unemployed, but the number of people that are finding it very difficult to get back into the workforce,” said Bixby.
It’s a structural problem that has led to the lowest job participation rate in 35 years.
Economic analysts say automatic spending cuts and higher taxes enacted earlier this year have aggravated the problem. Joseph Gagnon at the Peterson Institute said the so-called sequester has been a drag on U.S. growth.
“That has held us back. So that has meant, instead of a great year, we’re just having a sort of so-so year - not a very good year, but not bad; just sort of mediocre,” said Gagnon.
That mediocre job growth could force the U.S. Federal Reserve to rethink how how fast it scales back policies that have kept long-term interest rates at record lows.
Economist Cary Leahy said the job numbers may be reason enough to delay plans to wind down bond purchases worth $85 billion a month. “Even though the Fed may still surprise us and decide to begin tapering this month, this is basically a major reason not to do that."
Not everyone is concerned. A recent survey of new business owners shows confidence at its highest level in more than a year.
Dane Stangler, director of research for the Kauffman/Legal Zoom Confidence Index, said, "One, people are starting businesses, two among the people who are starting businesses, they’re highly confident about one, their own business prospects and two, about the wider direction of the economy.”
Bright spots include the manufacturing sector, which added 14,000 jobs after five months of declines.
The average number of hours worked per week also ticked higher in August - a sign that companies need more labor.