Muddled U.S. jobs picture to weigh on Fed decision
Employers are sketching a hazy picture of the U.S. job market for the Federal Reserve to weigh in deciding this month whether to reduce its stimulus for the economy – and, if so, by how much.
The economy added 169,000 jobs in August but many fewer in June and July than previously thought. The unemployment rate fell to 7.3 percent, the lowest since 2008, but only because more people stopped looking for work and were no longer counted as unemployed.
All told, yesterday’s report from the Labor Department pointed to a lukewarm job market: Hiring is steady but subpar. Much of the growth is in lower-paying occupations. And many people are giving up on their job searches in frustration. The proportion of Americans working or looking for work reached its lowest point in 35 years.
The sluggish jobs report reflects a U.S. economy that’s still struggling to accelerate. The economy grew at a modest 2.5 percent annual rate from April through June, and most analysts think it’s weakened since then.
The Fed has been buying $85 billion a month in Treasury and mortgage bonds to try to keep home-loan and other borrowing rates low. Many economists have expected the central bank to taper its monthly purchases after it meets Sept. 17 and 18. Yesterday’s data may lead the Fed to slow its bond buying more gradually than it might have otherwise.
“Soft employment gains only muddied the waters,” said James Marple, an economist at TD Economics. “While the data did not take September tapering off the table, it does suggest that the Fed will use a lighter touch.”
Marple and some other economists said they now think the Fed may announce this month that it’s trimming its bond purchases by $10 billion rather than earlier expectations of $20 billion.
The revised job growth for June and July shrank the previously estimated gain for those months by 74,000. July’s gain is now estimated at 104,000 – the fewest in more than a year and down from a previous estimate of 162,000. June’s was revised to 172,000 from 188,000.
Dean Baker, co-director of the Center for Economic and Policy Research, said lower-wage industries have been generating a disproportionate role in hiring because many unemployed people have become desperate enough to take such jobs.
Aside from their low pay, many of those workers are being limited to fewer hours than they’d like.
“In a weak labor market, workers can’t find anything better,” Baker said.
The percentage of adults working or looking for work, known as the participation rate, fell to 63.2, the lowest since 1978. The rate for men, which has been declining gradually, fell last month to just below 70 percent – its lowest point on records dating to 1948.
Doug Handler, chief U.S. economist at IHS Global Insight, said the decline in the male participation rate suggests that many men who once worked in areas such as manufacturing and construction are giving up on finding work rather than transitioning to another industry.