Hiring Still Slow in August, Yet Unemployment Rate Ticks Down to 7.3 Percent

Andrew Klips |

The U.S. added fewer jobs in August than expected, although the unemployment rate dropped 0.1 percent as more people gave up looking for work, creating more questions over whether or not the Federal Reserve will begin tapering its stimulus package this month.

The Labor Department reported Friday morning that the nation added 169,000 jobs last month, shy of economist predictions of 174,000.  The participation rate, the number of people actively looking for work (that aren’t considered “unemployed”), shrunk again, allowing the unemployment rate to tick down to 7.3 percent from 7.4 percent in July.  That’s the lowest unemployment rate since December 2008.  Economists expected the unemployment rate to be flat in August.

The proportion of citizens with a job or looking for work dropped to 63.2 percent, its lowest level in 35 years.

Adding to the disappointment were large revisions to previous months.  July’s job additions were slashed from an original estimate of 162,000 all the way down to just 104,000, the worst month in over one year.  June’s gains were trimmed from 188,000 to 172,000.

In August, the private sector added 152,000 jobs and the government created 17,000 jobs.  The jobs that were created weren’t particularly high-end jobs.  Retailers led the way, adding 44,000 jobs, followed by health care, which added 33,000 jobs.  Employment in motor vehicles and parts reversed course, adding 19,000 jobs in August after declining by 10,000 in July.  Most of the swing is attributable to employers laying off workers at factories for re-tooling of machines in July and then bringing them back to work in August.

Investors have been playing a serious guessing game trying to analyze economic data as to how it relates to the Fed throttling down its massive easing package known as QE3.  The Fed has been buying $85 billion each month in Treasuries and mortgage-backed securities to try and keep interest rates low and spur the economy.

The markets were looking for a stronger report, especially after data on Thursday showing that the one-month moving average of initial jobless claims dropped to its lowest level since October 2007, two months before the recession began. 

The problem is, and has been, that even though employers are keeping staffers, they are very reluctant to hire new workers.  To that end, people are giving up on looking for a job, ultimately translating to a misleading unemployment rate that should actually be much higher.

The Hamilton Project at Brookings Institution estimates that it would take the U.S. creating 300,000 jobs each month in order to fill the gap left by the recession within four years.

In the past 12 months, the U.S. has averaged 184,000 new jobs each month, but the pace has drastically decelerated, with the average over the past three months falling to 148,000 each month.

In a rare bright spot in the report today, the average wage rose a nickel to $24.05.  The average work week was essentially flat at 34.5 hours.

The markets are coming out green at the opening bell following the weak report.  Why?  More than likely because traders are reading the report as increasing the likelihood that the Fed won’t hit the brakes on easing this month.  That positive sentiment probably won't continue through the day as reality sets in about the report.  QE3 is viewed by most as supportive of equities and traders fear that the Fed taking away the punch bowl will be damaging to stocks.  Whether that contention is logical or not, is certainly in question.  Check out what Equities contributor Harry Dent has to say on the matter, saying that the Fed is blowing air into a big bubble and it’s just a matter of time before it pops.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
FNLPF Fresnillo Plc Ord 19.96 -0.40 -1.94 1,223


Emerging Growth

Lomiko Metals Inc.

Lomiko Metals Inc is an exploration stage company. It is engaged in the acquisition, exploration and development of resource properties. Its projects include Vines Lake project and Quatre - Milles…

Private Markets


Snapchat is the fastest way to share a moment with friends. The mobile app, allows users to not only share photos with friends but also control how long they can…

Almond Smart Home Router by Securifi

Securifi sells user friendly touch screen routers that also have support for IoT/home automation.Securifi’s Almond revolutionized wireless router setup with its easy to use Touchscreen Interface in 2012. Now our…