US payrolls miss expectations in August

The US economy added slightly fewer jobs than expected, sparking fresh predictions the Fed will hold this month.

Federal Reserve policymakers including chair Janet Yellen and vice chairman Stanley Fischer will be left to interpret mixed signals after jobs data missed forecasts. Picture: AP Photo/Brennan Linsley.

Hiring cooled in August but remained consistent with steady US job growth capable of holding down unemployment, leaving Federal Reserve policy makers to interpret mixed signals.

Non-farm payrolls rose by a seasonally adjusted 151,000 last month, the Labor Department said Friday. The unemployment rate, calculated from a separate survey of American households, was 4.9 per cent in August, unchanged from July. Economists surveyed by The Wall Street Journal had expected employers would add 180,000 jobs and forecast an unemployment rate of 4.8 per cent.

The August payroll gain was a slowdown from the more than 270,000 jobs added in each of the prior two months. But many economists expected moderating growth, believing the economy is nearing full employment. US employers added enough jobs to absorb most new entrants into the labour, keeping the unemployment rate in the range most Fed policy makers view as the longer-term average. Economists surveyed by the Journal earlier this year estimated on average the US only needed to add 145,000 jobs each month to keep up with growth in the labour force.

The latest data is the last broad measure of the labour market that Fed officials will see before meeting on Sept. 20-21. The figures could spark a vigorous discussion between policy makers who see the economy as healthy enough to absorb a rate increase and those concerned about low inflation, middling economic growth and uncertainty from the presidential election and global turmoil.

“While the report is solid,” said Quincy Krosby, Market Strategist at Prudential Financial. “It falls short of providing a resounding vote for a September move by the Fed.”

Several economists noted Friday that the August payroll figure often comes in below forecasts and then is revised up in subsequent months. That further complicates the decision in front of the Fed in less than three weeks.

“Even if Fed officials are suspicious, they will want to wait another couple of months to ensure the data does rebound in September and that August is revised higher,” said Capital Economics economist Paul Ashworth.

Friday’s report produced a mixed picture on wages as well. Average hourly earnings for private-sector workers rose by 3 cents, or 0.1 per cent, in August from July to $US25.73. Earnings were up 2.4 per cent from a year earlier. That could suggest the sub-5 per cent unemployment rate is putting modest upward pressure on wages.

But annual growth slowed from 2.7 per cent the prior month, the best gain in seven years. The slower growth could reflect the mix of hiring in August tilting toward typically lower-paying fields.

Employment at restaurants grew by a seasonally adjusted 34,000; retailers added 15,100 jobs; social-assistance jobs grew by 21,700. In contrast, there were job cuts in often better paying fields. The manufacturing sector shed 14,000 jobs. Employment in both the mining sector, which includes the oil and gas industry, and the construction sector also shrank in August.

The government added 25,000 jobs last month, and the private-service sector grew by 150,000.

US employers have added jobs at a 182,000 monthly pace so far this year. That is down from average gains in 2015 and 2014 — the best two years for employment growth since 1999 — but consistent with average growth over the past two economic expansions.

In some ways, the labour market may be finding its level. After falling during most of the expansion, the unemployment rate has been little changed this year. The labour-force participation rate held steady at 62.8 per cent in August. The rate has inched up slightly since touching a four-decade low of 62.4 per cent in September 2015.

Another measure of unemployment and underemployment, including Americans who are working part time because they can’t find fulltime jobs, also held steady at 9.7 per cent in August. That rate has changed little this year, and remains elevated relative to previous periods when the unemployment rate was below 5 per cent.

The average workweek last month decreased by 0.1 hour to 34.3 hours.

The health of the labour market, and the broader economy, is an important issue in the US presidential election.

Democratic nominee Hillary Clinton’s campaign in part is based on President Barack Obama’s record, which includes consistent job creation since late 2010, after the economy emerged from a deep recession. Mrs. Clinton has said, if elected, she would boost jobs though investment in infrastructure and green technology.

But there are worrisome signs outside the job market. US economic growth has held near 1 per cent for three straight quarters, anaemic gains even by the standards of the lacklustre expansion. Business investment has decreased this year, corporate profits are soft and threats from economic weakness abroad still loom.

Republican Donald Trump often points out the current expansion features the weakest average annual growth of any since World War II. He says his trade and tax policies will lead to more high-paying jobs for Americans.

Dow Jones