The United States economy added fewer jobs in August than analysts were expecting. But a rebound in the number of hours Americans worked and a decent wage increase should help the US avoid a recession, even as global economic growth struggles.
The economy added 130,000 jobs in August, according to figures released Friday by the US Department of Labor. That is below analysts’ expectations even though job creation was bolstered by the federal government hiring temporary workers for the 2020 US Census.
Private employers in the US added only 96,000 jobs in August – roughly level with the 100,000 needed to absorb new people entering the workforce.
The tepid headline number reveals weaknesses that could be developing in the fabric of the US economy as the trade war with China drags on. The world’s two largest economies slapped new tariffs on each other on Sunday, though both countries agreed Thursday to restart high-level trade negotiations next month.
Manufacturing – a sector that the administration of US President Donald Trump has argued stands to ultimately benefit from the tough stance on trade with China – led the slowdown in hiring, adding an anaemic 3,000 jobs in August.
Manufacturing activity in the US contracted for the first time in three years last month, according to data released this week by the Institute for Supply Management. August marked a fifth straight month of declining factory activity.
But Friday’s jobs report also revealed positive trends. The broader household survey showed 571,000 people entered the labour force last month and unemployment remains near its lowest level in half a century. Average weekly hours worked rebounded in August to 34.4 from 34.3 in July, while average hourly earnings increased 3.2 percent on an annualised basis.
The bump in workweek hours and pay for Americans should continue to fuel consumer spending, which is the engine of the US economy accounting for roughly two-thirds of growth.
The economy is also on track to get a shot in the arm if the Federal Reserve cuts interest rates when policymakers meet later this month. The Fed lowered borrowing costs in July for the first time since 2008, and the August slowdown in hiring gives policymakers more room to pull the trigger and lower borrowing costs again. A quarter-percentage-point rate change is widely expected.