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 Nonfarm payrolls increased 173,000 last month after an upwardly
revised gain of 245,000 in July, the Labor Department said on
Friday. August's gain was the smallest in five months as the factory
sector lost the most jobs since July 2013.
The jobs count, however, may have been tarnished by a statistical
fluke that has often led to sharp upward revisions to payroll
figures for August after initial weak readings.
Indicating the hiring slowdown was likely not reflective of the
economy's true health, the jobless rate fell two-tenths of a point
to 5.1 percent, its lowest level since April 2008.
In addition, payrolls data for June and July were revised to show
44,000 more jobs created than previously reported, bringing the
average job gains for the past three months to a solid 221,000.
Average hourly earnings increased 8 cents, the biggest rise in seven
months and the length of the average workweek also expanded.
"The payrolls data is certainly good enough to allow for a Fed rate
hike in September," said Alan Ruskin, global head of currency
strategy at Deutsche Bank in New York. "The big question is still
whether financial market volatility will scupper the plans."
Stocks on Wall Street, which could be pressured by higher rates,
ended down more than 1 percent. Prices for U.S. government debt
rose, while the dollar fell marginally against a basket of
currencies.
While the mixed report did little to alter views that the U.S.
economy remains vibrant despite volatile global financial markets
and slowing Chinese growth, it could further complicate the Fed's
decision at a policy meeting on Sept. 16-17.
In the wake of a recent global equities sell-off, financial markets
significantly scaled back bets on a September rate hike over the
past month. But Fed Vice Chairman Stanley Fischer told CNBC last
week it was too early to decide whether the stock market rout had
made an increase less compelling.
"With this jobs report ... the Federal Reserve finds itself in a
real uncertainty jam," said Mohamed El-Erian, chief economic adviser
at Allianz in Newport Beach, California.
MISSING FORECASTS
Economists in a Reuters survey had forecast nonfarm payrolls
increasing by 220,000 last month, but they had also warned that the
model used to smooth the data for seasonal fluctuations is often
thrown off at the start of a new school year.
They said the data could be further muddied because of a typically
low response rate from employers to the government's payroll surveys
in August.
But the evidence of a tightening labor market added to a string of
upbeat data, including figures on automobile sales and housing, that
has suggested the economy was moving ahead with strong momentum
after growing at a robust 3.7 percent annual rate in the second
quarter.
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The decline in the unemployment rate brought it into the range that
most Fed officials think is consistent with a low but steady rate of
inflation, and would likely bolster their expectation that a pick-up
in wages will help lift inflation toward their 2 percent target.
A broad measure of joblessness that includes people who want to work
but have given up searching and those working part-time because they
cannot find full-time employment fell to 10.3 percent, the lowest
level since June 2008.
In August, construction payrolls rose 3,000 on top of the 7,000 jobs
added in July. Mining and logging employment fell by 10,000 jobs,
the eighth straight monthly decline.
The sector has shed 90,000 jobs so far this year, with industries
that support mining activity accounting for 80 percent of the drop.
Oilfield giants Schlumberger <SLB.N> and Halliburton <HAL.N> and
many others in the oil and gas industry have announced thousands of
job cuts this year.
Manufacturing payrolls slid 17,000 as sharp declines at metals,
machinery and food industries offset a solid increase in employment
in the automobile sector.
The 0.3 percent increase in hourly earnings left them 2.2 percent
above their year-ago level, still well below the 3.5 percent growth
rate economists consider healthy.
Aggregate weekly hours rose 0.4 percent, the largest gain since
November. The combination of more hours and higher earnings left
workers with a 0.7 percent increase in their take-home wages.
Some analysts think average hourly earnings are being held back by
falling wages in oil field services.
But a tighter labor market and decisions by several state and local
governments to raise the minimum wage should eventually translate
into faster earnings growth.
A number of retailers, including Walmart <WMT.N>, Target <TGT.N> and
TJX Cos <TJX.N>, have increased pay for hourly workers since the
start of the year.
"Regardless of which meeting this year the Fed begins to raise
rates, next year we expect core inflation to surprise on the upside,
forcing the Fed into tightening policy more aggressively than the
markets currently anticipate," said Paul Ashworth, chief U.S.
economist at Capital Economics in Toronto.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Tim
Ahmann)
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