The U.S. economy added 169,000 jobs in August, according to the Bureau of Labor Statistics’ latest report, out this morning, which is lower than expected — economic indicators like industrial sentiment and auto sales had people predicting August was going to be a strong month for jobs. But, because the labor-force participation rate dropped, so did the unemployment rate. When Ben Bernanke says that the unemployment rate can understate the weakness of the labor market, this is what he means.
This month’s jobs number is not way off the average over the past year, when the U.S. economy has added 184,000 jobs per month, but that average masks a slowdown in recent months: As AEI’s Michael Strain points out, the average payroll growth over the past three months was 148,000 jobs; six months ago, in February of 2013, the three-month average was 233,000 jobs a month. A different survey, the “household survey” used to calculate the unemployment rate, found that the number of Americans employed actually dropped this month, by 115,000. The labor-force-participation rate dropped 0.2 percent, to 63.2 percent — its lowest level since 1978; the employment-to-population ratio also dropped.
It all adds up to a relatively weak job report — this should and actually put off the tapering of the Federal Reserve’s quantitative-easing program until after the Fed’s meeting on September 17 and 18, when it was expected. As Neil Irwin points out, there are other headwinds coming for the U.S. economy, too — the high likelihood of a fiscal fight this fall, the possibility of conflict in Syria, and especially the higher oil prices that will almost definitely result.
As in previous months, strong employment growth was concentrated in health-care, food and beverage services, and retail — not exactly high-wage sectors, unfortunately. Local-government payrolls rose by 20,000, all in education, the first seasonally adjusted increase in that sector for a long time; an improving housing market should be helping local governments back to some degree of fiscal health. Federal payrolls were unchanged.
Average hourly earnings and average hours worked both ticked up, slightly, complementing the slow but steady growth in jobs. The two previous months’ jobs reports were revised down; the economy added 74,000 fewer jobs in June and July than previously reported.