WASHINGTON — U.S. employers added 169,000 jobs in August and many fewer in July than previously thought. Hiring has slowed from the start of the year and could complicate the Federal Reserve’s decision this month on whether to reduce its bond purchases – and, if so, by how much.
The Labor Department said Friday that the unemployment rate dropped to 7.3 percent, the lowest in nearly five years. But it fell because more Americans stopped looking for work and were no longer counted as unemployed. The proportion of Americans working or looking for work reached its lowest point in 35 years.
The revised job growth for June and July shrank the gain for those months by a combined 74,000. July’s gain is now estimated at 104,000 – the fewest in more than a year and down from the previous estimate of 162,000. June’s figure was revised to 172,000 from 188,000.
Employers have added an average of just 148,000 jobs in the past three months – the weakest three-month stretch in a year. The average monthly job gain for 2013 so far is 180,000, almost identical to the 183,000 average for 2012.
Dow Jones industrial average stock futures rose modestly after the report was released at 8:30 a.m. Eastern time. The yield on the 10-year Treasury note fell to 2.87 percent, from 2.95 percent. Investors may think the jobs report makes it less likely the Fed will significantly slow its bond purchases after it meets Sept. 17-18.
The Fed’s $85 billion a month in Treasury and mortgage bond purchases have helped keep home-loan and other borrowing rates ultra-low to try to encourage consumers and businesses to borrow and spend more.
Friday’s report “is a mixed bag that can be used to support an immediate tapering of the Fed’s monthly asset purchases or delaying that move until later this year,” said Paul Ashworth, an economist at Capital Economics, said.
Still, Ashworth said he expects the Fed to begin tapering its bond purchases later this month. Chairman Ben Bernanke has said the Fed could begin slowing its purchases by year’s end if the economy continues to strengthen – and end the purchases by mid-2014.
One possible concern for the Fed is that most of the hiring in August was in lower-paying industries such as retail, restaurants, and bars. This continues a trend that emerged earlier this year.
Retailers added 44,000 jobs in August. Hotels, restaurants, and bars added 27,000. Temp hiring rose by 13,000.
In higher-paying fields, the report was mixed.
Manufacturers added 14,000, the first gain after five months of declines. Government, which has been a drag on job growth since the recession ended more than four years ago, gained 17,000. It was the biggest such increase in nearly a year. The increase was all in local education departments. Federal employment was unchanged, and state government lost 3,000 jobs.
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.
The report contained some other positive signs: Average hourly earnings picked up, rising 5 cents to $24.05. Hourly pay has risen 2.2 percent in the past 12 months. That’s slightly ahead of the 2 percent inflation rate over the same period.
The average hourly work week ticked up to 34.5 from 34.4, a sign that companies needed more labor. That can lead to larger paychecks.
The modest jobs figures contrast with other recent data that suggested that the economy could be picking up. For example, reports from the Institute for Supply Management, a trade group of purchasing managers, showed that manufacturers expanded at the fastest pace in more than two years last month.
And service firms grew at the quickest pace in more than eight years, the ISM found.