US job creation slips in August

Lower-than-expected rise last month may reduce prospects of a Fed interest rate hike

WASHINGTON • United States job growth rose less than expected last month, which could dim prospects of a Federal Reserve interest rate hike later this month.

Employers added 173,000 workers last month and the jobless rate dropped to 5.1 per cent, the lowest since April 2008 and a level that the Federal Reserve considers to be full employment.

The gain in payrolls, while lower than the forecast, followed advances in July and June that were stronger than previously reported, the Labour Department said yesterday. Average hourly earnings climbed more than the forecast and workers put in a longer work week, the report also showed.

Persistent hiring indicates that employers were upbeat about America's demand prospects leading up to mounting concerns of further deterioration in the emerging economies.

Fed policymakers meeting in less than two weeks will weigh resilient US employment conditions against the recent turmoil in world financial markets as they debate the timing of any interest rate increase.

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 10.3 per cent, the lowest since June  2008, from 10.4 per cent in July.

"The labour market is clearly still improving," Mr Jim O'Sullivan, chief US economist at High Frequency Economics, New York, said before the report.

"Employment growth is more than strong enough to keep the unemployment rate coming down, just given the rate of growth in the labour force."

The data could make Fed officials hesitant to push borrowing costs higher at a policy meeting on Sept 16 and 17.

In the wake of a recent global equities sell-off, financial markets significantly scaled back bets on a September rate hike over the past month. But Fed vice-chairman Stanley Fischer told CNBC last week it was too early to decide whether the stock market rout had made an increase less compelling.

Still, the labour market is improving and adds to a string of upbeat data, including figures on automobile sales and housing, that has suggested the US economy was moving ahead with strong momentum early in the third quarter after growing at a robust 3.7 per cent annual rate in the April-to-June period.

The two-tenths of a percentage point decrease in the jobless rate took it to its lowest level since April 2008 and brought it into the range that most Fed officials think is consistent with a low but steady rate of inflation.

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 10.3 per cent, the lowest since June 2008, from 10.4 per cent in July.

Job gains were spread across nearly all sectors of the economy last month. The energy and manufacturing sectors, which are grappling with last year's sharp drop in crude oil prices and a strong greenback, were the exceptions.

Construction payrolls rose by 3,000 last month on top of the 7,000 jobs added in July.

Mining and logging employment fell by 10,000 jobs last month.

Manufacturing payrolls decreased by 17,000, despite robust demand for automobiles.

The increase in hourly earnings left them 2.2 per cent above their level a year ago, but still well below the 3.5 per cent growth rate economists consider healthy.

Some analysts think earnings are being held back by falling wages in oil field services.

But a tightening labour market and decisions by several state and local governments to raise the minimum wage should eventually translate into faster earnings growth and give the Fed confidence that inflation, which collapsed with oil prices, will move closer to its 2 per cent target.

A number of retailers, including Walmart, Target and TJX Cos, have increased pay for hourly workers.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 05, 2015, with the headline 'US job creation slips in August'. Print Edition | Subscribe