Tags: Jobs | Obama | Fed | employment

Labor-Force Participation Rate at 31-Year Low as 368,000 People Quit Seeking Work

Friday, 07 Sep 2012 12:40 PM

 

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U.S. jobs growth slowed sharply 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 Barack Obama as he seeks re-election.

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, that was because so many Americans gave up the hunt for work. The survey of households from which the jobless rate is derived actually showed a drop in employment.

Meanwhile, the labor-force participation rate, or the percentage of Americans who either have a job or are looking for one, has plunged to 63.5 percent — the lowest since September 1981. A total of 368,000 people gave up looking for work in August.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

"This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week," said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.

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

"This report underscores President Obama's failed promises to get our economy moving again," House of Representatives Speaker John Boehner, the top Republican in Congress, said in a statement. "Wages are stagnant, gas prices and healthcare costs are up, our national debt has surpassed $16 trillion, and millions of Americans remain out of work or underemployed."

The data dampened spirits in U.S. stock markets, which opened marginally higher. Treasury debt prices rallied and the dollar slipped against the euro to its lowest in nearly four months as traders increased bets the Fed would launch a third round of bond buying at a meeting next Wednesday and Thursday.

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.

LOOKING FOR A SILVER LINING

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.

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 43 straight months — the longest stretch since the Great Depression.

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.

Republicans were quick to seize on the fact that the unemployment rate has held above 8 percent for essentially Obama's entire term.

Democrats sought to find a silver lining.

"Today we learned that the economy added 96,000 jobs in August, marking 30 consecutive months of private sector job growth," Senator Bob Casey, the Democratic chairman of the congressional Joint Economic Committee said in a statement.

The lack of headway putting Americans back to work has 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, or quantitative easing.

"This is certainly a disappointing report and increases the odds for QE, which were already reasonably high," said David Sloan, an economist at 4CAST in New York.

Economists said at the very least the Fed appeared set to push further into the future its conditional pledge to keep rates near zero through late 2014. Futures traders added to bets on Friday that the central bank would keep rates near zero until at least the second quarter of 2015.

AMERICANS GIVE UP SEARCHING FOR WORK

The weak tenor of the report was also emphasized by revisions to June and July data to show 41,000 fewer jobs created than previously reported.

In addition, 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. A total of 368,000 people gave up looking for work in August, the household survey showed.

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. The latest gain left the economy 4.7 million jobs in the hole since a brutal recession struck in December 2007, and that does not take into account population growth, which would make the deficit even greater.

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.

Job creation last month was weak across the board, with manufacturing payrolls falling 15,000, the first decline since September last year. Factory jobs were inflated in July because automobile manufacturers kept plants running when they would normally shut them for retooling.

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. Earnings have risen 1.7 percent over the past 12 months.

The average work week was steady at 34.4 hours in August.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

 

© 2014 Thomson/Reuters. All rights reserved.

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