August’s Weak Job Growth Appears To Be Anomaly, Economists say

August’s Weak Job Growth Appears To Be Anomaly, Economists say

By Jim Puzzanghera, Los Angeles Times

The disappointing 142,000 net new jobs added to the economy in August — the second straight month of slower growth — appears to be an anomaly and is not reason to panic that the recovery is faltering once again, economists said.

Although the Labor Department figures released Friday were the worst since December, it still was just one bad month after the best job creation streak since the dot-com boom, they said.

And there are some key reasons why the August report might have understated the health of the labor market, such as a grocery store strike in New England and seasonal adjustment problems with auto manufacturers.

“I don’t want to sugarcoat it. This this wasn’t a good report,” said Gus Faucher, senior economist at PNC Financial Services Group. “But I do think the economy is better than this and the labor market is better than this.”

The Obama administration echoed those sentiments Friday.

“Although the pace of job gains in August was below recent months, the broader trends are moving in the right direction,” said Jason Furman, chairman of the White House Council of Economic Advisers.

But Douglas Holtz-Eakin, a former Bush adminstration official who was a top economic adviser to 2008 Republican presidential nominee John McCain, said the report was bad news for the recovery.

“The spin will be to ignore this as a data anomaly, but the reality is that it is another piece of evidence against the notion that the economy will accelerate significantly in 2014,” said Holtz-Eakin, president of the American Action Forum think tank.

Job growth in August was well below economists’ expectations for 230,000 net new jobs and at least temporarily dashed growing optimism that the labor market finally had settled into strong and consistent growth.

The economy had added more than 200,000 jobs for six straight months, the best stretch since 1997.

The Labor Department also revised down job growth for June and July by a total of 28,000 positions.

The unemployment rate dropped a tenth of a percentage point to 6.1 percent last month, as expected.

But the drop came because the labor force participation rate also fell. It ticked down to 62.8 percent, matching the lowest level since 1978. The number of discouraged workers rose by 34,000 to 775,000.

Some key sectors had poor showings in August, led by retail.

The industry shed 8,400 jobs after adding nearly 21,000 in July. A key factor was the loss of 17,000 jobs at food and beverage stores in August.

But the Labor Department noted the industry was affected by a strike at the Market Basket grocery store chain in New England, which has 25,000 employees.

The strike ended last week.

“The strike did take people out of the workforce and the strike was settled,” said Jack Kleinhenz, chief economist at the National Retail Federation.

He said it’s not time to panic about the jobs market, noting other indicators imply the economy is doing better.

“When you think about the economy as a jigsaw puzzle, this is a puzzle piece that just doesn’t fit,” Kleinhenz said of the August jobs report. “I don’t believe it’s a cause for alarm, or that the direction of the economy is changing.”

In a positive sign for retail, the Kroger Co. said Friday it would hire 20,000 workers. It’s the nation’s largest grocery store chain.

Initial jobless claims have been averaging about 300,000 a week, a low level that indicates a healthy labor market. And private readings on manufacturing and service sector growth have pointed toward strong growth.

“There’s been nothing out there right now flashing a red light saying expectations need to be scaled back,” said Mark Hamrick, Washington bureau chief of, a financial information website.

“I really can’t find any reason to believe that this is something that is more than a one month occurrence,” he said.

After adding 28,000 positions in July, manufacturers last month did not increase their payrolls at all for the first time in more than a year.

A key reason was employment at motor vehicle and automotive parts factories falling by 5,000 after an increase of 13,000 positions in July.

But those numbers appeared to be misleading.

Auto sales have been strong and that led to changes in when the industry shut down factories for the annual summer retooling, which affects the Labor Department’s seasonal adjustments to the jobs numbers.

“Firms in this industry laid off fewer workers than usual for factory retooling in July and recalled fewer workers than usual in August,” said Erica L. Groshen, commissioner of the Bureau of Labor Statistics. “This contributed to a seasonally adjusted increase in July and decrease in August.”

Some economists expect August’s job growth numbers to be revised up next month.

Faucher predicts the number will end up closer to 200,000, which he believes is the underlying pace of job growth.

“It was going to be difficult to keep up that 200,000 (job growth) streak, but I don’t’think its going to be difficult to keep up that 200,000 pace,” Faucher said.

Although the economy might fall below that figure for a month or two, that should be the average going forward, he said.

Even with August’s poor performance, job growth is averaging 207,000 during the past three months.

AFP Photo/Justin Sullivan

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