The U.S. economy added 169,000 jobs in August and the unemployment rate ticked down to 7.3 percent from 7.4 percent according to data from the Department of Labor.
August’s report has taken on special significance because it’s the last report before the Federal Reserve meets to decide whether to begin curtailing its stimulus.
- John Ydstie, NPR economics correspondent.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson.
MEGHNA CHAKRABARTI, HOST:
I'm Meghna Chakrabarti, in for Robin Young. It's HERE AND NOW. Coming up, President Obama heads home from the G-20 economic summit in Russia, but most of the attention was on Syria, not the economy.
HOBSON: But first to the economic news here in the U.S. Today the Labor Department said the economy added 169,000 jobs in August, that was below expectations. The unemployment rate did fall from 7.4 to 7.3 percent, but that was in part because many people dropped out of the labor force.
Joining us now to dig into the numbers is NPR economics correspondent John Ydstie. John, welcome.
JOHN YDSTIE, BYLINE: Thanks, Jeremy, nice to be here.
HOBSON: Great to have you, and 169,000 jobs, as we said, lower than expected. What happened?
YDSTIE: Well, the headline number was lower than the 175 to 180 thousand jobs economists had expected for August, but it was in the ballpark. So standing alone, I don't think it would have been disappointing. What is troubling is the huge downward revision for July, down 58,000, which puts job growth for that month barely above 100,000. And then there was a smaller downward revision for June.
And together that leaves the average job growth for the past three months at just under 150,000, a clear deceleration from earlier in the year. Among things you could point to as causes, disappointing income growth and tepid consumer spending and the effects of the budget sequester being a drag on growth.
HOBSON: It's incredible, these downward revisions. The margin of error on these things is like 100,000. But the rate did go down as well, John. I guess you could say that is good news. However, as we said, the participation rate in the labor force the lowest level in something like 35 years, so people dropping out of the search.
YDSTIE: Right, yeah. This drop in the unemployment rate is largely due to over 300,000 people leaving the labor force in August, not to more people getting jobs, which is what you'd want. It's more likely they were discouraged and can't find a job.
Now, you know, in part it's a long-term demographic trend of baby boomers retiring and leaving the labor force, but several years into a recovery, you know, when you're still around 20 million people unemployed or underemployed, you'd like to have the labor force growing, and employment was falling because people aren't finding jobs.
HOBSON: What are the sectors that are actually doing well now? And which ones are doing particularly badly?
YDSTIE: Well, retailers, restaurants, drinking establishments are doing well. Health care continues to add jobs. And professional and business services are on an upward trend. Manufacturing added 18,000 jobs in August but virtually all of it due to jobs in the auto industry, which is doing quite well. Construction employment, on the other hand, was flat after being down in July.
And, you know, here's an interesting statistic about who's getting the jobs, and it's all about education. The unemployment rate for workers with a Bachelor's degree or higher dropped to three and a half percent last month. All other categories of education level either stagnated or worsened. And for people without a high school diploma, the jobless rate jumped to 11.3 percent last month.
So it's an education-sensitive labor market.
HOBSON: And of course this is all being watched very closely by the Federal Reserve as policymakers consider whether to start winding down or, as they have been saying, tapering their economic stimulus efforts. What might the Fed do as a result of today's number?
YDSTIE: Well, you know, this was a disappointing report today, but other data coming in this week suggests things might be looking better. We had an important forward-looking report on both manufacturing and the service sector showing both of them strengthening, and we had fewer people applying for unemployment benefits last week than at any time since the beginning of the recession.
Now, that said, the Fed is focused on improvement in the labor market and the unemployment rate. So today's report could muddy the water a little bit. I think it's still likely the Fed will begin to dial back this $85 billion a month in stimulus when policymakers meet in the middle of the month. They're anxious to begin exiting this extraordinary intervention.
But you know, maybe they'll dial back 10 billion instead of 20 billion.
HOBSON: John, we just have about 15 seconds left here, but I have to ask, the idea that this would be seen as a disappointing report, we've seen job growth every month now for a few years. We're coming up on the fifth anniversary of the financial crisis. Are we simply not willing to accept good news?
YDSTIE: Well, you know, it's hard not to be critical of this slow job growth that's left so many people unemployed and on the sidelines for so long. It's really a tragedy. But you know, it's not unexpected given the time it takes historically to recover from the kind of financial crisis that we experienced five years ago.
HOBSON: NPR economics correspondent John Ydstie, thanks so much.
YDSTIE: You're welcome, Jeremy. Transcript provided by NPR, Copyright NPR.