Economy Adds 96,000 Jobs

By JEFFREY SPARSHOTT And CONOR DOUGHERTY

U.S. job growth slowed in August, signaling a stalling economy that could mute any post-convention momentum for President Barack Obama and spur the Federal Reserve to take further steps to stimulate the economy.

Nonfarm employment was up by a seasonally adjusted 96,000 and figures for the previous two months were revised down, the Labor Department said Friday. The report portrayed a sluggish economy that continues to move sideways, leaving few opportunities for the nation's 12.5 million unemployed.

The unemployment rate?which is politically salient and comes from a separate survey than the jobs data?fell to 8.1% from 8.3%. That was because an estimated 368,000 people gave up looking for work. Throughout this year, the unemployment rate has bounced between 8.1% and 8.3%. Meantime, the labor force participation rate, which is the share of the population that is working or looking for work, fell to its lowest level since 1981.

Friday's weak report increases the likelihood that the Federal Reserve will launch an easing program at the conclusion of its policy meeting next week, including a new bond-buying program. Last week at a Jackson Hole, Wyo., meeting of economists and central bankers, Fed Chairman Ben Bernanke described the weak labor market as a grave problem?a strong suggestion that he wanted to take new actions to strengthen economic growth. He also said the economic benefits of a bond-buying program exceeded the costs.

Democrats at their national convention in Charlotte, N.C., this week said Mr. Obama had put the U.S. on the path to recovery and he would fight hardest for workers and the middle class. Mr. Obama Thursday night said his re-election would lead to "new jobs, more opportunity" and an economy built "on a stronger foundation."

Republicans are seeking to persuade voters that the president has increased deficits without giving enough of a boost to the economy to earn a second term. A spokesman for Republican candidate Mitt Romney this week said Mr. Obama "has the worst economic record of any president in modern history."

Searching for good news in the guts of the report, economists found little. The average workweek was flat and July's figures were revised downward. Average earnings slipped slightly.

The weak payroll numbers, taken with other reports that indicate a manufacturing slowdown, suggest growth isn't picking up and remove a final hurdle standing in the way of the Fed proceeding with new action. Officials have been leaning toward an open-ended bond-buying program in which the Fed holds open the possibility that it will continue to buy bonds after an initial allotment is purchased if the economy doesn't pick up. They also have been leaning toward purchasing mortgage backed securities.

The U.S. economy added 96,000 jobs in August, fewer than expectations for 125,000 and an indication of a slack recovery. The unemployment rate fell to 8.1%. Phil Izzo in New York and Sudeep Reddy in Washington have details on The News Hub. Photo: Getty Images.

While the U.S. economy has been adding jobs every month since October 2010, the economy?and in particular the labor market?has continuously struggled to hit the kind of velocity needed to bring down the unemployment rate. This is largely because the economy's legs have never quite moved in unison.

For instance, the factory sector was strong for much of the recovery but the housing market remained weak. Today the housing market is perking up just as the factories shift downward. Manufacturers shed 15,000 jobs in August. This has left the country prone to outside shocks, such as supply disruptions brought on by the Japanese tsunami disaster last year and the current pressures over the European debt crisis.

A Historical View

U.S. unemployment since 1948

The Labor Department on Friday said private companies accounted for all of the growth in August payrolls, adding 103,000 jobs during the month.

Governments, meanwhile, shed 7,000 positions as state and local governments cut payrolls.

In the private sector, employment rose at restaurants and bars, in the professional- and technical-services sector, in health care and in the utilities sector.

In another sign of a weak labor market, average earnings ticked down by one cent to $23.52 an hour, while the average workweek was unchanged at 34.4 hours.

A broader measure of unemployment?which includes job seekers as well as those in part-time jobs?fell to 14.7% in August from 15.0% the previous month.

?Jon Hilsenrath contributed to this article.

Write to Jeffrey Sparshott at jeffrey.sparshott@dowjones.com and Conor Dougherty at conor.dougherty@wsj.com

Source: http://online.wsj.com/article/SB10000872396390443686004577637191324704890.html?mod=asia_home

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