(Bloomberg) – Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery.
The economy added 96,000 workers after a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. The jobless rate fell to 8.1 percent.
Treasuries and gold rose on bets the figures make it more likely Fed policy makers will expand record monetary stimulus next week after Chairman Ben S. Bernanke called unemployment a â€œgrave concern.â€ The report also dealt a blow to President Barack Obama one day after he accepted the Democratic Partyâ€™s nomination for a second term.
â€œThis is definitely a setback for the labor market and the economy,â€ said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and former economist for the Fed. â€œThis clearly validates Bernankeâ€™s concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment.â€
The yield on the 10-year Treasury note, which moves inversely to price, fell to 1.62 percent from 1.68 percent late yesterday. Gold futures for December delivery climbed 1.5 percent to $1,731 an ounce on the Comex at 11:54 a.m. in New York. The Standard & Poorâ€™s 500 Index rose 0.3 percent to 1,435.75.
Employers may be reluctant to expand headcounts as they face a global economic slowdown and the so-called fiscal cliff, the $600 billion of tax increases and spending cuts that will take effect automatically at the end of the year unless Congress acts.
Some companies are planning to reduce staff. Mountain View, California-based Google Inc. (GOOG) said on Aug. 13 it will cut about 4,000 positions at its Motorola Mobility Holdings Inc. unit, with about one-third of the reductions coming in the U.S. Printer maker Lexmark International Inc. (LXK) on Aug. 28 announced plans to eliminate 1,700 jobs globally.
For Kimberly Hackler of White, Georgia, the job search has been â€œfrustrating at best, a little disheartening.â€ The 49- year-old has been looking for work since November, applying for about 190 positions.
â€œIâ€™m very concerned about those of us who are unemployed and where are we going to find stable employment,â€ Hackler said. â€œI donâ€™t see the economy improving anytime soon. I am concerned it could get worse.â€
Todayâ€™s report dealt a blow to Obamaâ€™s hopes of gaining momentum coming out of his party convention and gave Republican candidate Mitt Romney another campaign weapon.
â€œIf last night was the party, this morning is the hangover,â€ Romney said in a statement. â€œIt is clear that President Obama just hasnâ€™t lived up to his promises and his policies havenâ€™t worked.â€
Labor Secretary Hilda Solis used the report to renew calls for Congress to approve a $447 billion jobs plan proposed by the administration last September.
â€œWe still see some areas where we need more improvement,â€ Solis said in an interview with Bloomberg Television. â€œThatâ€™s why we need to have cooperation with the Congress. Theyâ€™ve got a proposal up there, the American Jobs Act, that would help create a million jobs.â€
Bloomberg survey estimates ranged from increases of 70,000 to 185,000. Revisions to prior reports subtracted a total of 41,000 jobs from payrolls in the previous two months.
Factory employment fell by the most in two years, temporary-help companies eliminated positions for the first time in five months, and the share of the working-age population in the labor force slumped to the lowest since 1981.
Private payrolls, which exclude government agencies, rose 103,000 after a revised gain of 162,000. They were projected to rise by 142,000, the survey showed.
American Axle & Manufacturing Holdings Inc. (AXL), a maker of axles and crankshafts, is among companies looking to expand as the auto industry rebounds. The Detroit-based company plans to hire 400 to 500 workers at its Three Rivers, Michigan, factory over the next two years, David Tworek, a spokesman, said in an e-mail last month.
The jobless rate fell from 8.3 percent as 368,000 Americans left the labor force. Unemployment was forecast to hold at 8.3 percent, according to the survey median. Estimates in the Bloomberg survey ranged from 8.1 percent to 8.4 percent.
Factory payrolls decreased by 15,000, compared with a survey forecast for a 10,000 increase, after a 23,000 gain in the previous month. Automakers cut 7,500 jobs last month.
The figures reflected the reversal of a July increase that was propelled by fewer shutdowns at automakers for annual retooling related to the new model year. Still, carmakers may continue to add workers. Chrysler Group LLC, Ford Motor Co., General Motors Co. (GM), Toyota Motor Corp. and Honda Motor Co. reported U.S. auto sales in August that rose more than analysts estimated as new models attracted buyers.
Employment at service-providers increased 119,000. Construction companies added 1,000 workers and retailers took on 6,100 employees. Government payrolls decreased by 7,000. The number of temporary workers decreased almost 5,000.
Average hourly earnings were little changed, and up 1.7 percent from August 2011, todayâ€™s report showed. The 12-month change matched the smallest gain since record-keeping began in 2007.
The participation rate, which indicates the share of working-age people in the labor force, fell to 63.5 percent, the lowest since September 1981, from 63.7 percent.
Companies from Intel Corp. to FedEx Corp. are sounding alarms on the outlook for the worldâ€™s largest economy as global growth cools.
Intel, the worldâ€™s largest semiconductor maker, today slashed its third-quarter sales prediction amid declining demand for personal computers from corporate customers. FedEx this week projected its first decline in quarterly earnings in almost three years as slowing growth hurt demand for the express packages that provide most of its sales.
Payroll gains slowed from an average 226,000 in the first quarter to 73,000 in the April to June period, before picking up in July. The U.S. has managed to recover 4.1 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.
The unemployment rate, derived from a separate Labor Department survey of households, has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948.
Bernanke, in an Aug. 31 speech in Jackson Hole, Wyoming, cited â€œthe daunting economic challengesâ€ that confront the U.S. He also said the Fed will provide additional policy stimulus as needed to promote a stronger economic recovery.
â€œThe stagnation of the labor market in particular is a grave concern,â€ he said. Persistently high unemployment â€œwill wreak structural damage on our economy that could last for many years.â€
Fed officials at their July 31-Aug. 1 meeting were moving toward additional monetary policy action, according to minutes of the gathering. Many members of the panel said more stimulus will be needed â€œfairly soonâ€ unless the recovery shows signs of a â€œsubstantial and sustainable strengthening.â€