Friday’s August jobs report documented another weak step in the long, slow and tepid ongoing economic recovery, with the U.S. economy adding 169,000 jobs and the unemployment rate edging down to 7.3 percent.
Those numbers fell short of economists’ expectations for the month, and other data contained in the release from the Bureau of Labor Statistics hinted that the jobs market remains weaker than the headline numbers suggest. Revisions showed that 74,000 fewer jobs were created in July and June than previously measured.
The labor force participation rate fell slightly, from 63.4 in July to 63.2 percent in August — the lowest rate since 1978 — indicating that the improvement in the unemployment rate over the past few months has been driven largely by Americans leaving the official workforce rather than gaining jobs. The number of people who have been looking for work for more than 27 weeks remained stuck at 4.3 million. The long-term unemployed make up almost 40 percent of all those missing jobs.
With the downward revisions to July and June data, the U.S. economy has averaged just short of a 150,000 gain in seasonally adjusted non-farm payrolls for the past three months. At that rate of job growth, the economy would not return to a pre-recession level of employment and a pre-recession rate of labor force participation until after 2025, as projected by the Hamilton Project’s jobs calculator. At the average rate of jobs growth for the past year — nearly 184,000 — the jobs gap would not be closed for nearly nine years.
Job growth in August was strongest in service sectors that usually are low-paying, including retail and service sector jobs. Clothing stores and restaurants showed relatively strong gains, as did administrative and support services. The health care industry also added 33,000 jobs in August. No construction jobs were created, and the number of workers building homes and businesses fell.
The broader U-6 unemployment rate that includes those who are working part-time for economic reasons or are only marginally attached to labor force fell to 13.7 percent from 14 percent in July after rising earlier in the year. In another silver lining to the report, the number of Americans working part-time because their hours were cut or they couldn’t find full-time work fell by 334,000 from July. Over the past year, part-time work has now dropped by 125,000.
The government appears to have stopped shedding jobs, with federal jobs remaining mostly unchanged from July to August after falling slightly in previous months. The number of state government workers fell by 3,000, but local governments hired 20,000 workers in August.
Friday’s report will be the last before the Federal Reserve’s Sept. 17-18 meeting. The Fed is widely expected to begin slowing down the pace of its stimulus bond purchases later this year, but officials have stressed that any changes to the timeline for phasing out the purchases will depend on the economy showing continued improvement.
"We still expect the Fed to start the tapering process at this month's meeting, although this report will keep the debate going," High Frequency Economics economist Jim O'Sullivan wrote in a note.