Sep 3, 2010

U.S. Economy Lost 54,000 Jobs in August; Unemployment Rate Rises to 9.6%

By TOM BARKLEY and VICTORIA MCGRANE

Job losses continued to mount in the U.S. economy last month, though at a more modest pace than expected, putting further pressure on policy makers to take action to spur growth and employment.

A separate report indicated the U.S. nonmanufacturing sector expanded at a much slower pace last month.

Nonfarm payrolls fell by 54,000 last month, matching the level of revised losses recorded the previous month, the U.S. Labor Department said Friday. The revision in July layoffs to 54,000 followed an original estimate of a 131,000 drop in payrolls.

The U.S. economy has shed jobs for three straight months, though the losses in August were about half the 110,000 predicted by economists in a Dow Jones Newswires survey.

The unemployment rate, calculated using a separate household survey, edged up to 9.6%, as expected, after holding at 9.5% for previous two months.

The report is likely to cause renewed debate during the long Labor Day weekend over what new steps the Federal Reserve and Congress should consider to jump-start the job market.

Last month, the Fed moved to stop any premature contraction in its balance sheet, effectively taking its foot off the brake pedal by reinvesting proceeds from any maturing mortgage securities into Treasurys.

While the central bank has held off on stepping on the gas–either by resuming asset purchases or other unconventional measures–Fed officials expressed concern during the Aug. 10 meeting about the sluggish labor market and debated potential causes.

Fed Chairman Ben Bernanke declared his readiness a week ago to pursue further moves if “unexpected developments” derail the economic expansion. The “painfully slow recovery” in the jobs market was a central policy concern, he said, given the risks it poses to consumer confidence and the broader economy.

Manufacturers shed 27,000 jobs, after adding 34,000 the previous month.

Professional and business services payrolls rose 20,000. Construction, a sector of the economy that has struggled, added 19,000 jobs, as well.

Total government employment, which includes state and local jobs, fell 121,000. The declines were a result not just of the letting go of 114,000 census workers, but also job cuts by state governments facing budget pressures.

In a positive sign, the report showed 42% of unemployed Americans were out of work for more than six months in August, down from 45% in July. It becomes harder to find a job as time goes by, as skills are lost and employers may view long periods of unemployment with suspicion.

An indication of slack in the market, and thus potential inflation pressures, moved slightly higher. Average hourly earnings of all employees increased by $0.06 to $22.66 in August. The average workweek was unchanged at 34.2 hours.

Service-Sector Growth Slows

The Institute for Supply Management’s nonmanufacturing purchasing managers’ index fell to 51.5 in August, from 54.3 in July.

Forecasters surveyed by Dow Jones Newswires had expected the August PMI to slip to 53.0. Unlike its manufacturing counterpart released Wednesday, the non-manufacturing index was worse than expected.

Readings above 50 indicate expanding activity.

The ISM said its August business activity/production index fell to 54.4 from 57.4 in July, but the level indicates production is still expanding.

The new-orders index dropped to 52.4 last month from 56.7.

Nonmanufacturing employment worsened in August. The ISM’s nonmanufacturing employment index fell to 48.2 in August from 50.9 in July.

The ISM report runs counter to data within the employment report. Earlier on Friday, the government reported that private-sector services jobs rose 67,000 in August and construction payrolls rose by 19,000.

Price pressures increased last month. The prices index jumped to 60.3 from July’s reading of 52.7.

Read more at: http://online.wsj.com/article/SB10001424052748703946504575469331075476058.html?mod=WSJ_hpp_LEFTTopStories

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