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Jobs Growth Brakes In August, Seen Forcing Fed's Hand


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Jobs growth brakes in August, seen forcing Fed's hand.

By Lucia Mutikani

WASHINGTON (Reuters) - Jobs growth slowed more than expected in August, setting the stage for the Federal Reserve to pump additional money into the sluggish economy next week and dealing a blow to President Obama as he seeks reelection in November.

Nonfarm payrolls increased only 96,000 last month, the Labor Department said on Friday. While the unemployment rate dropped to 8.1 percent from 8.3 percent in July, it was largely due to Americans giving up the search for work.

The report's weak tenor was also underscored by revisions to June and July data to show 41,000 fewer jobs created than previously reported. The labor force participation rate, or the percentage of Americans who either have a job or are looking for one, fell to 63.5 percent -- the lowest since September 1981.

The lackluster report keeps the pressure on Obama ahead of the November vote in which the health of the economy looms large.

Economists polled by Reuters had expected payrolls to rise 125,000 last month, but some had pushed their forecasts higher after upbeat data on Thursday.

The economy has experienced three years of growth since the 2007-09 recession, but the expansion has been grudging and the jobless rate has held above 8 percent for more than three years -- the longest stretch since the Great Depression.

Fed Chairman Ben Bernanke last week said the labor market's stagnation was a "grave concern," a comment that raised expectations for a further easing of monetary policy as soon as the central bank's meeting on Wednesday and Thursday.

The jobless rate peaked at 10 percent in October 2009, but progress reducing it stalled this year, threatening Obama's bid for a second term. An online Reuters/Ipsos poll on Thursday gave Republican Challenger Mitt Romney a 1-point edge on Obama, 45 percent to 44 percent.

The lack of headway putting Americans back to work has also put the question of further monetary stimulus on the table at the Fed. The central bank has held interest rates close to zero for nearly four years and pumped about $2.3 trillion into the economy through two bouts of bond buying.

The weak report makes it more likely that the Fed will launch a third round of bond purchases next week. Since the beginning of the year, job growth has averaged 139,000 per month, compared with an average monthly gain of 153,000 in 2011.

Economists blame fears of the so-called U.S. fiscal cliff -- the $500 billion or so in expiring tax cuts and government spending reductions set to take hold at the start of next year unless Congress acts -- and Europe's long-running debt problems, for the slowdown in hiring.

There was little improvement in construction employment, which added 1,000 jobs. Temporary hiring fell 4,900, declining for the first time since March.

Utilities payrolls saw a snap back, adding 8,800 after being depressed by the strike of about 9,000 workers in July.

Government payrolls declined 7,000, falling for a sixth straight month.

Average hourly earnings fell one cent last month, highlighting the underlying weakness in the labor market.

The average work week was steady at 34.4 hours.

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Payrolls in U.S. Rose 96,000 in August, Jobless Rate Fell

By Shobhana Chandra - Sep 7, 2012 8:37 AM ET

Sept. 7 (Bloomberg) -- Payrolls rose less than projected in August and the unemployment rate declined as more Americans left the labor force, indicating the U.S. labor market is stagnating. The economy added 96,000 workers last month following a revised 141,000 rise in July that was smaller than initially estimated, Labor Department figures showed today in Washington. Unemployment fell to 8.1 percent, and hourly earnings were unchanged. Peter Cook reports on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Sept. 7 (Bloomberg) -- Tom Porcelli, chief U.S. economist at RBC Capital Markets, talks about the outlook for the U.S. labor market and economy. He speaks with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance." (Source:

Sept. 7 (Bloomberg) -- Anne Mathias, director of Washington research at Guggenheim Securities, talks about the U.S. economy and markets, and the 2012 presidential election. She speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)

Employers may be reluctant to expand headcounts as they face a global economic slowdown and the so-called fiscal cliff of automatic tax increases and government spending cuts. The damage inflicted by the lack of progress on jobs is the reason Federal Reserve Chairman Ben S. Bernanke last week said the central bank may need to do more.

“This is definitely a setback for the labor market and the economy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and former economist for the Fed. “This clearly validates Bernanke’s concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment.”

Stock-index futures held gains after the figures on speculation the Fed will pursue more monetary stimulus. The contract on the Standard & Poor’s 500 Index expiring this month rose 0.3 percent to 1,434.7 at 8:52 a.m. in New York.

Bloomberg survey estimates ranged from increases of 70,000 to 185,000. Revisions to prior reports subtracted a total of 41,000 jobs from payrolls in the previous two months.

Participation Rate

Factory employment fell by the most in two years, temporary-help companies eliminated positions for the first time in five months and the share of the working-age population in the labor force slumped to the lowest since 1981.

Today’s figures come two months before the presidential election. Employment and the economy are central themes in the campaign, with President Barack Obama and Republican challenger Mitt Romney each trying to convince voters they can best energize the expansion and create jobs.

Private payrolls, which exclude government agencies, rose 103,000 after a revised gain of 162,000. They were projected to rise by 142,000, the survey showed.

The jobless rate fell from 8.3 percent as 368,000 Americans left the labor force. Unemployment was forecast to hold at 8.3 percent, according to the survey median. Estimates in the Bloomberg survey ranged from 8.1 percent to 8.4 percent.

Factory Jobs

Factory payrolls decreased by 15,000, compared with a survey forecast for a 10,000 increase, after a 23,000 gain in the previous month. Automakers cut 7,500 jobs last month.

The figures reflected the reversal of a July increase that was propelled by fewer shutdowns at automakers for annual retooling related to the new model year. Still, carmakers may continue to add workers. Chrysler Group LLC, Ford Motor Co., General Motors Co. (GM), Toyota Motor Corp. and Honda Motor Co. reported U.S. auto sales in August that rose more than analysts estimated as new models attracted buyers.

Employment at service-providers increased 119,000. Construction companies added 1,000 workers and retailers took on 6,100 employees. Government payrolls decreased by 7,000. The number of temporary workers decreased almost 5,000.

Average hourly earnings were little changed, and up 1.7 percent from August 2011, today’s report showed.

The participation rate, which indicates the share of working-age people in the labor force, fell to 63.5 percent, the lowest since September 1981, from 63.7 percent.

Search ‘Disheartening’

For Kimberly Hackler of White, Georgia, the job search has been “frustrating at best, a little disheartening.” The 49- year-old has been looking for work since November, applying for about 190 positions.

“I’m very concerned about those of us who are unemployed and where are we going to find stable employment,” Hackler said. “I don’t see the economy improving anytime soon. I am concerned it could get worse.”

American Axle & Manufacturing Holdings Inc. (AXL), a maker of axles and crankshafts, is among companies looking to expand as the auto industry rebounds. The Detroit-based company plans to hire 400 to 500 workers at its Three Rivers, Michigan, factory over the next two years, David Tworek, a spokesman, said in an e-mail last month.

Others are looking to pull back. Mountain View, California- based Google Inc. (GOOG) said on Aug. 13 it will cut about 4,000 positions at its Motorola Mobility Holdings Inc. unit, with about one-third of the reductions coming in the U.S. Printer maker Lexmark International Inc. (LXK) on Aug. 28 announced plans to eliminate 1,700 jobs globally.

This Year

Payroll gains slowed from an average 226,000 in the first quarter to 73,000 in the April to June period, before picking up in July. Before today’s report, data showed it had taken the U.S. three years to recover about half, or 4 million, of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.

The unemployment rate, derived from a separate Labor Department survey of households, has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948.

Bernanke in an Aug. 31 speech in Jackson Hole, Wyoming, cited “the daunting economic challenges” that confront the U.S. He also said the Fed will provide additional policy stimulus as needed to promote a stronger economic recovery.

“The stagnation of the labor market in particular is a grave concern,” he said. Persistently high unemployment “will wreak structural damage on our economy that could last for many years.”

Fed officials at their July 31-Aug. 1 meeting were moving toward additional monetary policy action, according to minutes of the gathering. Many members of the panel said more stimulus will be needed “fairly soon” unless the recovery shows signs of a “substantial and sustainable strengthening.”

Edited by Dirtybirdn@tion
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"4 more years" is typically reserved for a candidate seeking re-election. "W" was constitutionally prohibited from seeking re-election. 2 people from the same party can have a vastly different approach.

(that said I didn't really like McCain and did not vote for him)

typically, yes, it was a play on words, which is why i didn't say "four more years of W", i said "four more years of a republican president"

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you guys were calling for four more years of a republican president when the country was LOSING 900k jobs/month.

the fact is we are in better shape now then we were in 2008. We are gaining jobs, not losing them.

This is factual.

It is also factual that conservatives have appealed for cuts to government spending, yet lament the loss of government jobs.

It's also worth noting how absurd the entire charade really is. The only jobs the President can create are government jobs, yet those are the very jobs conservatives criticize government for creating.

Obama cannot hire private employees. Private corporate income is at an all time high.

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was McCain not running as a republican? or was he a democrat then? i have a hard time keeping up with his party affiliation.

Are all Democrats the same? If so, they'll never win another Presidential race.

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you guys were calling for four more years of a republican president when the country was LOSING 900k jobs/month.

the fact is we are in better shape now then we were in 2008. We are gaining jobs, not losing them.

I don't know if we are necessarily in better shape. We are gaining jobs, but they certainly aren't the same jobs that were lost. Many of the jobs being created now are low end service positions that pay maybe ten bucks an hour. It's hard to support a family on that.

That being said, I think its due more to policy over the last 20 years, than anything Obama specifically is doing or not doing. But in any rate, the jobs figures shouldn't be anything to crow about.

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This jobs report couldn't have come at a worse time for President Obama. I thought the DNC would push him into a very solid lead....but now...I don't know. I doubt it.

Facts of the day trump gloryfied speechs every day. People are living this recession and have been for quite a while now.

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I find it funny people blame Bush for the current recession, but are quick to say this current President has nothing to do with jobs. Ironic don't ya think!

It's the Presidents job to be a leader and bring both parties to the table, make some policy's

that promote job growth. Maybe Obama should not have pushed/rammed through and very unpopular healthcare plan and focused more on job stimulating policy's.

Ohh wait the president has nothing to do with that. Maybe someone should have told that to the crazy lady above in the DNC video.

Keep tap dancing libs!

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So basically the worst jobs situation since Carter. (yes I know 1981 is the first year of the Reagan admin but if you can give a 4 year excuse you can give Reagan a few months excuse).

In reality, it's worse than when Carter was President. At that time, a lot more women weren't working by choice, so the the labor participation rate was naturally going to be lower.

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the share of the working-age population in the labor force slumped to the lowest since 1981.

^^^^That's the worst news in the whole report. People have given up.

So many people have been dropped off of the workforce that the unemployment rate will be extremely sluggish in rebounding even if job creation ramps up strong. As jobs begin to be produced many of those discouraged workers will re-enter the job force creating and opposite effect to the current one.

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This jobs report couldn't have come at a worse time for President Obama. I thought the DNC would push him into a very solid lead....but now...I don't know. I doubt it.

I'm somewhat doubtful of that. I suspect that those undecided voters for whom watching a convention is what makes the difference are still charged up from whatever charging they might gotten from the convention.

I don't know what charging they got, cause I chose to watch five minutes of Blubberella (not making that up) on the The Movie Channel last night. But that's 5 more minutes than I watched of fringe convention.

Just hard for me to imagine that there are a meaningful number of voters who watched the DNC and said yep, that's my candidate and then when the jobs report came, then said no he's not, or even maybe not.

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So many people have been dropped off of the workforce that the unemployment rate will be extremely sluggish in rebounding even if job creation ramps up strong. As jobs begin to be produced many of those discouraged workers will re-enter the job force creating and opposite effect to the current one.

How does the government measure someone re-entering the work force? I know how they measure them dropping out.....when thier unemployment stops.

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I'm somewhat doubtful of that. I suspect that those undecided voters for whom watching a convention is what makes the difference are still charged up from whatever charging they might gotten from the convention.

I don't know what charging they got, cause chose I to watch five minutes of Blubberella (not making that up) on the The Movie Channel last night. But that's 5 more minutes than I watched of fringe convention.

Just hard for me to imagine that there are a meaningful number of voters who watched the DNC and said yep, that's my candidate and then when the jobs report came, then said no he's not, or even maybe not.

Well you are right, but the bigger effect will be on the nightly news, which a lot more voters are watching. Instead of the news stories tonight being dominated by highlights of the DNC, this dreadful jobs report is going to throw a wet blanket all over that.

And it will remind people of thier own situations, of thier own undemployment, unemployment, or the fact that they haven't had a raise in 3 or 4 years (that's me).

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