WASHINGTON, Sept 6: US employers hired the fewest number of workers in eight months in August and more Americans gave up the hunt for jobs, providing a cautious Federal Reserve with more reasons to wait longer before raising interest rates. Nonfarm payrolls increased 142,000 last month after expanding by 212,000 in July, the Labor Department said yesterday. The jobless rate fell one-tenth of a percentage point to 6.1 per cent, but that was partly because people dropped out of the labor force.
‘Fed Chair Janet Yellen will be able to use the weakness to hold off hawks who would like to raise rates soon,’ said Diane Swonk, chief economist at Mesirow Financial in Chicago. Data for June and July were revised to show 28,000 fewer jobs created than previously reported. In addition, manufacturing saw no job growth and retail payrolls declined for the first time since February, although a workforce disruption at a grocery store chain in New England impacted the count. Even though job growth slowed, the report still suggested that some of the slack in the labor market was being taken up. US stocks ended higher, notching a fifth straight week of gains. Prices for US Treasury debt rose marginally, while the dollar recouped earlier losses and was little changed against a basket of currencies.
Interest rate futures, which had been pointing to a likely rate hike in June of next year, rose to suggest less of a chance. However, they still showed dealers expect the Fed to bump up borrowing costs next July.
Wall Street had expected payrolls to increase by 225,000. Swonk and other economists questioned whether the data was presenting an accurate picture given that it was at odds with other bullish labor market indicators. They noted that first-time applications for unemployment benefits are hovering near pre-recession levels, that manufacturing and service sector surveys showed strong employment growth in August, and that household perceptions of the labor market had brightened significantly. In addition, difficulties adjusting the data for seasonal fluctuations have tended to understate job growth in August, and the end of a mass employee walkout at the grocery chain Market Basket could lead to a bounce in retail employment this month. ‘The fundamentals in the economy remain solid, this is one month, and the economy should continue to expand at a decent pace in the second half of 2014,’ said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. (agencies)
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