WASHINGTON (Reuters) — U.S. 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, the Labor Department said on Friday. The unemployment rate fell one-tenth of a percentage point to 6.1 per cent as people dropped out of the labour force.
June and July data 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.
"Clearly its disappointing, but the preponderance of evidence is that the economy is still gaining a lot of traction," said Russell T. Price, senior economist at Ameriprise Financial in Troy, Michigan.
U.S. stock index futures pared losses on the data as traders reduced bets for an early interest rate increase. U.S. Treasury debt yields fell to session lows and the dollar fell 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 in July.
Economists had expected payrolls to increase 225,000 in August and the unemployment rate to fall to 6.1 per cent.
The surprise slowdown in job growth is at odds with labour market indicators such as first-time applications for unemployment benefits, which are hovering near their pre-recession levels.
In addition, manufacturing and service sector surveys showed strong employment growth in August and household perceptions of the labour market brightened significantly, which economists said were consistent with tightening conditions.
Some economists had cautioned that payrolls could miss expectations, noting that August is a generally weak month because of problems adjusting the data for seasonal variations.
The trend in the past has been for the government to revise August payrolls higher.
Number of long-term unemployed eases
Fed Chair Janet Yellen is concerned about sluggish wage growth, the still-elevated numbers of Americans working part-time even though they want full-time employment, and Americans still suffering from a long spell of joblessness.
The U.S. central bank has pointed to these metrics as evidence of "significant underutilization" of labour market resources that merits a stimulative monetary policy.
The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.8 per cent in August from 62.9 per cent in July.
But the other metrics on Yellen's so-called dashboard showed improvement in August.
A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to 12.0 per cent, the lowest level since October 2009, from 12.2 per cent in July.
The number of long-term unemployed Americans was the lowest since January 2009 and there was a decline in those working part-time for economic reasons.
Average hourly earnings rose 6 cents in August, which left them up 2.1 per cent from a year ago.
The jobs data comes ahead of a Fed policy meeting on Sept. 16-17. The central bank has kept benchmark lending rates near zero since December 2008 and financial markets do not foresee an increase until around the middle of next year.
The private sector accounted for the bulk of the increase in payrolls in August, advancing 134,000 after rising 213,000 in July. Government employment increased 8,000 as state governments hired teachers at the start of the new school year.
Manufacturing payrolls were the weakest in a year. The sector had added a hefty 28,000 jobs in July, which reflected a decision by automakers to keep assembly lines running in the summer. Auto payrolls fell 4,600, the first decline since March.
Construction employment advanced 20,000, rising for an eighth straight month. The length of the average workweek held steady at 34.5 hours for a sixth month in a row.
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