By Christopher S. Rugaber
AP Economics Writer
WASHINGTON (AP) - After two months of blockbuster gains, U.S. employers slowed their hiring in August to a modest increase of 151,000, reducing the likelihood that the Federal Reserve will raise interest rates when it meets this month.
The unemployment rate remained 4.9 percent for a third straight month, the Labor Department said last Friday in its monthly jobs report.
August's job gain was far below July's 275,000, which was the most in eight months, and June's 271,000. Even so, over time, the current pace of hiring is enough to lower the jobless rate.
The figures might have been held back by temporary factors, such as layoffs by automakers while plants are being retooled for new models. The government tries to adjust for such seasonal changes but often struggles to do so accurately.
Over the past five years, August job growth has been revised up by an average of 70,000 in the following months. As a result, Fed policymakers may want to await further economic data before acting to make borrowing more expensive. If the Fed doesn't raise rates after it meets Sept. 20-21, most analysts expect it to do so in December.
They "will want to wait another couple of months, to ensure the data does rebound in September and that August is revised higher," Paul Ashworth, chief U.S. economist at Capital Economics, said in a research note.
The slowdown in hiring last month appeared to please stock investors, who likely see a diminished prospect of a Fed rate increase this month. Higher borrowing rates tend to weigh down stock prices. The Dow Jones industrial average was up 85 points in mid-day trading.
Hiring had been robust earlier this summer, with job growth averaging 232,000 for the past three months. Those gains appeared to make consumers more confident and willing to spend, potentially accelerating the economy's growth in the second half of this year after a sluggish start to 2016.
In August, though, hiring weakened across most major industries, and employers cut workers in manufacturing, construction and mining. Job growth slowed sharply in professional and business services, a category that includes higher-paying jobs such as engineers, accountants and architects as well as temporary jobs, which usually pay below-average wages. Temp help firms shed 3,100 positions.
If a relatively tepid pace of job growth keeps the Fed on the sidelines for longer, the continuation of ultra-low rates could sustain the economy's expansion, some analysts suggested.
"This is a healthy thing if the gains slow down a little bit, because that reduces the risk that the Fed will quickly raise rates and choke off the expansion," said Josh Wright, chief economist at iCIMS, a recruitment software company.
Still, modest hiring means it could take longer to fully heal the scars of the Great Recession. The proportion of Americans who are either working or looking for work has been flat for about two years near a 40-year low.
A broader gauge of unemployment, which includes part-time workers who would prefer full-time work as well as those who have given up their job hunts in the past year, remained at 9.7 percent. That is down from a peak of 17.4 percent in 2009, just after the recession ended.
Average hourly pay barely rose in August and has increased just 2.4 percent over the past 12 months. The average workweek declined slightly to 34.3 hours
Even with last month's deceleration in hiring, job growth has been strong over the past year, and economists are unlikely to be alarmed by one month's unexpectedly sluggish figure. Moreover, in previous years, the August jobs report has typically come in below economists' expectations and has usually been revised up in the following months. Over the past five years, the August figure has been revised up by an average of roughly 70,000.
Fed officials have noted the economy's improvement and the decline in the unemployment rate to levels considered all but fully healthy. Fed Chair Janet Yellen said in a speech last month that "the case for an increase ... has strengthened in recent months."
Still, the Fed's preferred inflation gauge remains below its target of 2 percent, a trend that may contribute to a delay in the central bank's resumption of the rate increases it began in December last year.
Other recent economic data have been mixed, though most analysts forecast a pickup in growth after a sluggish start to 2016.
Consumers appear more confident and have been spending at a steady clip. The Conference Board said this week that its measure of consumer confidence reached an 11-month high in August.
Americans are particularly optimistic about the job market, the board's survey found, with the percentage of Americans saying jobs are "plentiful" reaching its highest point in nine years.
At the same time, businesses remain cautious. Few are investing in new plants and equipment, thereby depressing factory output. A private survey found that manufacturing shrank in August as new orders and production plummeted.
Though Americans continue to make big purchases, such as for homes and cars, sales of both may have plateaued. Sales of existing homes slipped in July after reaching a nine-year high in June. And auto sales have leveled off this year after achieving a record high in 2015.
Published: Tue, Sep 06, 2016
