By Jim Puzzanghera, Los Angeles Times (TNS)
WASHINGTON — Job growth unexpectedly slowed last month to a modest 173,000, but the unemployment rate fell to a post-Great Recession low and average wages posted their biggest gain since January, the Labor Department said Friday.
The report sent mixed messages to Federal Reserve policymakers, who are trying to decide if the labor market and, more broadly, the economy are strong enough to handle the first increase in a key interest rate since 2006.
The low headline number was well below analyst expectations for 223,000 net new jobs, and down from July’s strong 245,000 figure.
But growth for June and July was revised up by a total of 44,000 net new jobs. That means the economy has added an average of 221,000 jobs over the last three months.
Because of seasonal adjustment issues, August figures have been revised up significantly in recent years as well.
Knowing that and combined with the other positives in the report, Friday’s data could be enough for Fed officials to determine later this month that the labor market is ready to handle a small increase in the central bank’s benchmark short-term interest rate.
The unemployment rate ticked down 0.2 percentage point in August to 5.1 percent, the lowest since April 2008. The rate now is nearly half what it was at its peak during the Great Recession.
Part of the reason for last month’s decline was about 41,000 people dropped out of the labor force. The percentage of adults participating in the labor force remained steady at 62.6 percent, the lowest level since 1977.
But wage growth, which has been sluggish during the recovery, is showing signs of accelerating. Average hourly earnings jumped 8 cents last month to $25.09, the largest gain since January. That followed a strong 6-cent increase in July.
For the year ended Aug. 31, earnings are up 2.2 percent, which is well above the low inflation rate.
Fed officials have been looking for signs of improving wage growth, which would show that the labor market is strengthening and also would add to inflationary pressures.
Friday’s report is the last major release of economic data before Fed policymakers meet on Sept. 16-17 to decide whether to raise the federal funds rate from the near 0 percent level it has been since late 2008.
Many analysts had expected the Fed would raise the rate by .25 percentage point at the September meeting, but roiling global financial markets in recent weeks have led to concerns an interest rate hike by the world’s leading central bank could add to the turmoil.
Shortly before the jobs report was released, a top Fed policymaker said Friday that financial market volatility should not delay a rate hike.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, Va., said in a speech to a local retail merchants group that “the Fed has a history of overreacting to financial market movements that seem unconnected to economic fundamentals.”
Lacker, a voting member of the policymaking Federal Open Markets Committee, noted the unemployment rate “has fallen more rapidly than many people expected” from its Great Recession peak of 10 percent in October 2009.
And with the “slow but steady” economic growth and inflation showing signs of picking up, it’s time for the Fed to start raising its benchmark interest rate, he said.
“I am not arguing that the economy is perfect, but nor is it on the ropes, requiring zero interest rates to get it back into the ring,” Lacker said. “It’s time to align our monetary policy with the significant progress we have made.”
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Photo: Samuel Huron via Flickr