Unemployment rate falls to 7.3 pct., but number of workers and job-seekers at a 35-year low
Jae C. Hong, Associated Press
WASHINGTON — The U.S. economy is producing jobs at a subpar pace — a trend the Federal Reserve will weigh in deciding this month whether to slow its bond buying and, if so, by how much.
Employers added 169,000 jobs in August but many fewer in June and July than previously thought, the Labor Department said Friday. Combined, June, July and August amounted to the weakest three-month stretch of job growth in a year.
The unemployment rate dropped to 7.3 percent, the lowest in nearly five years. But it fell because more Americans stopped looking for work and were no longer counted as unemployed. The proportion of Americans working or looking for work reached its lowest point in 35 years.
The jobs picture is sure to weigh heavily when the Fed meets Sept. 17-18 to discuss whether to scale back its $85 billion a month in Treasury and mortgage bond purchases. Those purchases have helped keep home-loan and other borrowing rates ultra-low to try to encourage consumers and businesses to borrow and spend more.
David Jones, chief economist at DMJ Advisors, said he still thinks the Fed will begin slowing its bond buying later this month. But he suspects the August data and the reduced job totals for June and July will lead the Fed to trim more gradually than it would have otherwise: The Fed could start reducing its monthly purchases by $10 billion rather than $20 billion.
Jones said he expects reductions of $10 billion between now and mid-2014. At that point, Chairman Ben Bernanke has said the Fed expects the bond buying could likely end.
The revised job growth for June and July shrank the previously estimated gain for those months by a combined 74,000. July's gain is now estimated at 104,000 — the fewest in more than a year and down from the previous estimate of 162,000. June's was revised to 172,000 from 188,000.
In the past three months, employers have added an average of just 148,000 jobs. The average monthly gain for 2013 so far is 180,000, almost identical to the 183,000 average for 2012.
Stock prices shifted between gains and losses in morning trading as investors weighed the job report's impact on the Fed and tensions over the prospect of U.S. military action against Syria. The Dow Jones industrial average rose about 30 points.
The yield on the 10-year Treasury note fell to 2.92 percent, from 2.95 percent before the jobs report was released at 8:30 a.m. Eastern time. Investors may think the report makes it less likely the Fed will significantly slow its bond purchases.
One possible concern for the Fed is that most of the hiring in August was in lower-paying industries such as retail, restaurants and bars. This continues a trend that emerged earlier this year.
Retailers added 44,000 jobs in August. Hotels, restaurants and bars added 27,000. Temp hiring rose by 13,000.
In higher-paying fields, the report was mixed.
Manufacturers added 14,000, the first gain after five months of declines. Government, which has been a drag on job growth since the recession ended more than four years ago, gained 17,000. It was the biggest such increase in nearly a year. The increase was all in local education departments. Federal employment was unchanged, and state government lost 3,000 jobs.
Auto manufacturers added 19,000 jobs. Americans are buying more cars than at any time since the recession began in December 2007. Some of the jobs also likely reflected workers who were rehired last month after being temporarily laid off in July, when factories switched to new models.
But construction jobs were unchanged in August. And the information industry, which includes high-tech workers, broadcasting and film production, cut 18,000 jobs. The biggest losses were in the film industry.
The report contained some other positive signs: Average hourly earnings picked up, rising 5 cents to $24.05. Hourly pay has risen 2.2 percent in the past 12 months. That's slightly ahead of the 2 percent inflation rate over the same period.
The average hourly work week ticked up to 34.5 from 34.4, a sign that companies needed more labor. That can lead to larger paychecks.
The modest jobs figures contrast with other recent data that suggested that the economy could be picking up. For example, reports from the Institute for Supply Management, a trade group of purchasing managers, showed that manufacturers expanded at the fastest pace in more than two years last month.
And service firms grew at the quickest pace in more than eight years, the ISM found.
AP Economics Writers Paul Wiseman and Martin Crutsinger contributed to this report.
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