U.S. employers absorbed fewer workers that expected in August, while the unemployment rate declined after individuals exited the labor force, boosting the case for the Federal Reserve to raise interest rates earlier than expected.
The number of employees who joined the workforce stood at 142,000, the weakest advance in 2014. This compares with a 212,000 advance in July, reported the Labor Department on Friday. The jobless rate plunged to 6.1 percent in August, down from 6.2 percent in July, as unemployment rate among teenagers declined while the labor participation rate fell.
“The shortfall in payrolls is disappointing, but it sure looks like a fluke, not a trend,” Diane Swonk, a Chicago-based chief economist at Mesirow Financial Inc., told Bloomberg News. “It gives Yellen a little wiggle room to do what she wants,” and that is to “not start raising rates any time soon.”
Economists surveyed by Bloomberg News had forecasted the payrolls to increase by 230,000 last month. The participation rate, which measures the percentage of working-age individuals who are employed, fell 0.1 percentage point or 10 basis points to 62.8 percent, tying with the weakest level since 1978.
The underemployment rate, which measures the number of part-time employees seeking full-time jobs and individuals who are looking for a job but have given up, fell to 12 percent, the lowest level since Oct. 2008, compared with 12.2 percent in July.
The decline in payroll numbers signaled a slowdown in a six-month long hiring spree that saw 1.4 million Americans get jobs. The industries where payrolls fell last month include transportation, retail and manufacturing.
The weak data also contrasts with other reports such as construction, auto sales and manufacturing that indicate that the economy is improving. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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