Friday, September 7, 2012

Employment Numbers Weaker Than Expected in August

This morning's just released unemployment rate dropped from 8.3% in July to 8.1% in August.

On the surface, that seems like a marked improvement. However, jobs created was 96,000 or less than the very weak number 125,000 predicted. How can that happen, you ask?

Well, people have dropped out of the labor force (labor force participation rate) and people have stopped looking for work. Thus, the magic of math allows the widely watched and reported official unemployment rate to decline. The broader U-6 number also fell to 14.7% from 15% last month.

A cynic would forecast that the official number will fall to 7.9% immediately prior to the election.

We'll comment further on this very weak report later, but here's the breaking news as contained in Economy Adds Fewer Jobs Than Expected:

"U.S. job growth slowed in August, a sign of a slack recovery that could mute any postconvention momentum for President Barack Obama and spur the Federal Reserve to take further steps in an effort to stimulate the economy.
U.S. payrolls increased by a seasonally adjusted 96,000 jobs last month, the Labor Department said Friday. The politically important unemployment rate, obtained by a separate survey of U.S. households, fell to 8.1% from 8.3%.

Economists surveyed by Dow Jones Newswires expected a gain of 125,000 in payrolls and an 8.3% jobless rate.

Republicans and Democrats will seize on Friday's numbers—the economy has added jobs every month since September 2010, though the pace has been uneven and the recovery remains tepid. Job growth has averaged 139,000 a month so far this year, compared with 153,000 in 2011.

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 convince voters that the president has increased deficits without giving enough of a boost to the economy to earn a second term. A Romney spokesman this week said Mr. Obama "has the worst economic record of any president in modern history."

Compounding the weak August report, July and June payroll numbers were revised down—July payrolls rose 141,000, compared with the initially reported 163,000, and June was up 45,000, versus an earlier estimate of 64,000.

And the lower unemployment rate is due largely to more people dropping out of the work force.

The latest news comes just days ahead of a meeting of Federal Reserve policy makers. . . .

"We think the Fed will launch QE3 on a consensus (or lower) employment report," economists at RBC Capital Markets said ahead of Friday's report.

The Labor Department 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 in at restaurants and bars, in the professional and technical services sector, in health care and in the utilities sector.

Manufacturing employment fell by 15,000, led by a drop in the auto sector. The Labor Department attributed part of the change to seasonal factors--there were fewer layoffs than expected in July, when the sector added 14,000 jobs, and fewer recalls in August.

In another sign of a weak labor market, average earnings ticked down by 1 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 stuck in part-time jobs--fell to 14.7% in August from 15.0% the previous month."

Summing Up

Not only aren't we creating more than 200,000 new jobs monthly.

Or even 150,000.

We're struggling to hit 100,000.

Thanks. Bob.

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