US Employers Hired 128,000 in Aug., Economy slowing, But not by too much
Jobs and factories continued to expand at a modest pace as the U.S. economy showed resilience despite crumbling housing activity.
Employers added 128,000 payroll jobs in August, the Labor Department said Friday.
That’s in line with hiring over the prior four months and nearly matched Wall Street forecasts.
The jobless rate edged down to 4.7%, its 2006 average.
Pay gains cooled, as hourly earnings rose just 2 cents in August.
But July wages were revised up slightly. And year-over-year hourly pay climbed 3.9% — a five-year high. Higher wages will help keep consumer spending strong, but they also fuel inflation concerns.
Retailers continue to shed staff, suggesting sector weakness. They lost 13,500 jobs in August and 95,000 over the last five months.
Factories shed 11,000 jobs in August, adding just 3,000 this year.
But manufacturing growth stayed solid. The Institute for Supply Management’s U.S. index fell 0.2 point to 54.5. That’s still well above the 50 mark that indicates expansion.
The auto sector remains manufacturing’s black sheep. Ford and General Motors plan big fourth-quarter production cuts. Ford and Chrysler on Friday reported big August sales declines.
The Federal Reserve on Sept. 20 is widely expected to once again leave interest rates at 5.25%.
The central bank paused on Aug. 8, assuming that two years of rate hikes would slow growth, thus stemming inflation. Analysts said Friday’s data back that theory.
“You put it all together and it appears to be right on script for what the Fed would like to see happening, meaning a slowdown, particularly in the housing sector, but neither pervasive nor extreme,” said Richard DeKaser, chief economist at National City Corp.
Once again, the day’s worst news came from the home front.
Construction spending dived 1.2% in July, the worst monthly drop in five years, the Commerce Department said. Private housing fell 2%. Nonresidential building continued to show strength.
July’s pending home sales index dived 7% to its lowest in three years, the National Association of Realtors said. That also suggests real estate pain is likely to continue.
Home prices have yet to fall year over year, but sales and permits have dived as inventories of unsold homes soar to record highs.
“The decline in housing, which started with a fall-off in sales and increasingly is characterized by declining building activity, is certainly gaining speed,” DeKaser said.
The question is what impact housing’s woes will have on consumers.
Shoppers seem to be holding up, though retailers’ results are mixed.
The University of Michigan revised up its sentiment index for August, but still below July. Other confidence gauges also have fallen.
Lower gasoline prices should lift Americans’ spirits. Steady hiring and bigger raises also may help.