Report Shows Weak Job Growth in August

By Toni Vranjes

September 7, 2012

The U.S. Labor Department has released the latest payroll numbers — and the results are disappointing.

Last month, employment was up by 96,000, below expectations of 130,000 new jobs. The unemployment rate fell from 8.3 percent to 8.1 percent, but the decline happened for the “wrong” reason, according to Nigel Gault, chief U.S. economist at IHS Global Insight. In a commentary on the August data, he noted that unemployment fell because of a declining labor force, rather than rising employment.

One particularly hard-hit area was manufacturing, which lost 15,000 jobs. In a blog post, economist Diane Swonk attributes the decline to several factors: the timing of auto-plant closures, sluggish growth abroad, and the threat of the “fiscal cliff.”

In addition, government cut 7,000 jobs, as teachers lost their jobs at the state and local levels.

The report also contained some other bad news: job creation was revised downward for the previous two months. The new data show job growth of 141,00 in July, down from 163,000. For June, the revisions show 45,000 new jobs, instead of 64,000.

The weak pace of hiring is unwelcome news for President Obama, as he embarks on the last two months of his re-election campaign. It comes the day after he delivered his acceptance speech at the Democratic National Convention, asking Americans for patience as he continues trying to strengthen the economy.

The poor employment numbers make it more likely that the Federal Reserve will move to stimulate the economy, according to Gault and Swonk.

“Today’s subdued employment report, coupled with significant downward revisions to the last two months, will tip the scales in favor of easing sooner, rather than later, for the Federal Reserve,” wrote Swonk, chief economist at Mesirow Financial. “Look for additional quantitative easing, mostly in the form of mortgage-backed security purchases, at next week’s meeting.”

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