The U.S. Labor Department issued its key metric of the month within the past hour, and it was an uninspiring report, in the main. Specifically, the government affirmed that the nation added just 96,000 new jobs in August, well under the latest expectation of an increase of 125,000 new hires. (Earlier in the week, the forecast had been for the addition of almost 150,000 new payrolls.) Worse, the July job-creation figure, initially estimated at 163,000, was pared back to just 141,000, and June's net payroll gain, earlier estimated at 64,000, was revised down to 45,000.
On a more positive note, the nation's unemployment rate, a disquieting 8.3% in July, fell to 8.1% in August. That was the lowest rate--matched in April of this year--since January of 2009, when the jobless rate was at 7.8%. It then rose steadily through much of that year, finally cresting at 10.0% in October.
The dour payroll gain, which is more of a forward looking metric than the jobless rate, suggests that while the recent economic metrics have been better, the U.S. business recovery remains in low gear. The Federal Reserve, looking at the bond-buying program launched yesterday in Europe, might now be encouraged to adopt some additional quantitative easing, such as a new bond-buying effort, on our shores, when its holds its FOMC meeting next week.
As to the latest report, the nation has now added jobs in every month since October of 2010. However, the pace has been uneven, and has been slowing thus far in 2012. For example, after job creation had averaged 153,000 a month in 2011, the rate of increase has now slipped back to just 139,000 so far through the first eight months of this year. Our sense is that payroll growth will need to average closer to 200,000 a month to materially bring the jobless rate down from its current perch north of 8%. That may be a monumental task for the economy in the months to come.
Worse, the drop in the unemployment rate last month was principally due to more people dropping out of the labor force. In July, the jobless rate had ticked up from 8.2% to 8.3%, as more people re-entered the job market and were thus considered to be technically unemployed. We seem to be dancing around the 8.0%-8.5% range, and at this juncture, we do not see much variance in the months to come. Fed Chairman Ben S. Bernanke, in fact, has termed the jobless rate gravely high, which has led to speculation that some additional monetary stimulus could be on the way--and perhaps as early as next week.
Finally, in another sign of a weak labor market, average earnings per hour ticked down by a penny last month, to $23.52. The average workweek was unchanged at 34.4 hours. All in all, it was a disappointing report and seemingly dashes hopes, for now, that the recent run of better economic news is the prelude to a faster rate of economic growth. Our sense, on this count, is that the nation's GDP will continue to press forward at a pedestrian rate of just 1.5%-2.0% for the next year, or so.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.