WASHINGTON: US employers hired fewer workers than expected in August and the jobless 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 this month.
Nonfarm payrolls increased by 169,000 jobs last month, the Labour Department said yesterday, falling short of the 180,000 Wall Street had expected and adding to signs that economic growth may have slowed a bit in the third quarter. While economists believe the Fed could still announce a tapering of its monthly bond purchases at its September 17-18 policy meeting, they said the weak data increased chances of a delay.
“A compromise between hawks and doves might be that the tapering will be announced in September but that the purchase amount will be reduced by an even smaller amount than we currently anticipate,” said Harm Bandholz, chief US economist at Unicredit Research in New York.
Economists said the $85bn in bonds per month that the US central bank is buying to hold interest rates down could be cut by as little as $5bn or $10bn.
The jobs report pulled the dollar down from a seven-week high against the euro. It also fuelled a rally in US government bonds, with the yield on the benchmark 10-year note falling back below three percent. US stocks moved higher, but investors remained jittery over a potential military strike against Syria.
Not only did hiring miss expectations last month, but the job count for June and July was revised to show 74,000 fewer positions added than previously reported.
While the unemployment rate fell a tenth of a percentage point to 7.3 percent, its lowest level since December 2008, the decline reflected a drop in the share of working-age Americans who either have a job or are looking for one.
That participation measure reached its lowest point since August 1978, a further sign of underlying economic weakness. The rate for men touched a record low.
“Declining participation is bad for financing entitlements long-term and the potential economic growth trend,” said John Silvia, chief economist at Wells Fargo in Charlotte, North Carolina.
Fed officials have made clear they would base their bond-buying decision on the progress the labour market has made since they launched their third round of ‘quantitative easing’ a year ago. When they started that round, they were looking at a jobless rate that stood at 8.1 percent.
Reuters
