August Hiring Disappoints

Hiring in August disappointed, with employers adding just 142,000 jobs last month even as the unemployment rate ticked down slightly, the government said Friday in a report that underwhelmed.

Mainstream economists had projected hiring almost 100,000 jobs above the number that came in for August. The unemployment rate was essentially flat, dipping a tenth of a percentage point to 6.1 percent.

“The job numbers were a disappointment, but are an aberration and not a sign the economy is faltering,” said Mark Zandi, chief economist for forecaster Moody’s Analytics. “Underlying job growth, abstracting from the ups and downs in the data, remains over 200,000 per month.”

But given that the economic-growth rate was recently revised upwards to 4.2 percent for the period between April and June, the presumption had been that economic growth and hiring were accelerating. The August jobs report was an outlier to a host of positive economic news of late.

“A number of special factors depressed the August gain,” Zandi said. “A strike at a grocer reduced employment by 17,000, a change in the timing of retooling at auto plants cost another estimated 15,000, and low response rates in August by employers generally result in weak initial estimates that are revised higher in subsequent months as those responses come.”

That said, July’s scorching 298,000 jobs was also revised downward by 31,000 hires to 267,000, giving pause to economists who thought the economy was shifting into third gear.

“Overall, today’s jobs numbers were frustrating, particularly given the strength seen in a host of other data points,” said Chad Moutray, chief economist for the National Association of Manufacturers, whose sector was largely flat in August. “Perhaps hiring activity took a holiday in August. My view is that hiring will pick up in the coming months, with accelerated levels of new orders and production leading to more employment growth.”

The timing of the hiring slowdown was inopportune for the Obama administration, which had called a meeting during the week with White House reporters to tout the improving economy as races for November’s congressional elections enter the home stretch.

“Although the pace of job gains in August was below recent months, the broader trends are moving in the right direction,” Jason Furman, head of the White House Council of Economic Advisors, said in his blog Friday. He looked past the weak month and instead noted that over the past 12 months, “private employment has risen by a total of 2.4 million.”

Economists largely discounted the weak August numbers, because consumer and business confidence measures are up, auto sales are nearing record proportions and construction spending is up sharply.

Yet the size of Friday’s miss was unwelcome, said Scott Anderson, chief economist of Bank of the West in San Francisco, noting that “the data do reinforce the still-fragile, stop-and-start nature of our labor-market recovery. Given the downside risks coming from abroad, it probably pays to remain cautious.”

Anderson didn’t think the sizzling 4.2 percent economic-growth rate from April to June will repeat in the quarter that runs from July through September. Some cooling in hiring, he said, “would make sense in this context.”

On a brighter note, the hard-hit construction sector added 20,000 jobs in August, continuing an eight-month hiring streak. Retailers lost 8,400 jobs last month, and after heating up earlier in the year, the leisure and hospitality sector added a modest 15,000 jobs.

The health-care sector has underperformed for much of the year, but added a solid 34,000 jobs last month. The better-paying professional and business services sector, reflecting white-collar jobs, led all others with 47,000. That is slower than previous months.

The labor market started the year softly, with an unusually harsh winter disrupting numerous sectors of the economy. That was followed by a snap-back, and August perhaps reflected a leveling out. Economists expect improvement in the final months of the year, but not a wild jump.

This article appeared in print in the September 8th, 2014 edition of Hamodia.