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Jobs Picture Stays Muddled

Unemployment rate drops as jobless quit looking

September 7, 2013
The Intelligencer / Wheeling News-Register

WASHINGTON (AP) - 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, Friday'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. Friday'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 say 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.

In the past three months, employers have added an average of just 148,000 jobs. For the first five months of the year, they had added an average of 199,000.

One possible concern for the Fed is that most of the hiring in August was in lower-paying occupations. This continues a trend that emerged earlier this year.

For example, retailers such as clothing stores, groceries and electronics outlets added 44,000 jobs. Hotels, restaurants and bars added 27,000. Temp hiring rose by 13,000.

Dean Baker, co-director of the Center for Economic and Policy Research, says 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.

Phillip Bailey, 39, took a job three months ago in kitchen prep at a McDonald's in Detroit after his unemployment benefits ran out. But his new job pays just $7.40 an hour, and he's usually scheduled for only about 15 to 20 hours a week.

He's working many fewer hours than he did in previous jobs. Bailey used to conduct home energy audits, which found ways for people to reduce utility bills.

"This is a lot less than I'm used to making," he said of his current job. "It's impossible to get by."

The August jobs report showed that hiring in higher-paying fields was more mixed.

Manufacturers added 14,000 jobs in August, the first gain after five months of declines. But that was more than offset by downward revisions that shaved off 26,000 jobs from June and July's figures. That left overall factory jobs in August 12,000 lower than the previous month.

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.

Hiring in construction has slowed drastically from earlier in the year despite a recovery in the housing industry. The construction industry has added an average of just 2,500 jobs a month in the past six months. That compares with an average 25,500 gain in the previous six months.

Employers might have turned cautious last month as the economy slowed. And the downgraded job totals for June and July reflected a loss of government jobs that wasn't picked up initially and was likely related to federal spending cuts that kicked in earlier this year.

 
 
 

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