Economy Added 169,000 Jobs in August; Jobless Rate Fell to 4.9%
By REUTERS
WASHINGTON (Reuters) - U.S. employers added 169,000 workers to their payrolls last month and the jobless rate fell unexpectedly to 4.9 percent, its lowest level since August 2001, a reminder of the economy's vigor before Hurricane Katrina slammed into the Gulf Coast.
While August's job-creation tally fell slightly short of the 190,000 gain expected by Wall Street, the Labor Department said on Friday job growth in June and July was stronger than previously thought, bumping up the tally for those two months by a combined 44,000.
Job gains in August were broad-based, although factory employment slipped by 14,000 - the third consecutive monthly decline. Over the past year, the manufacturing sector has shed 110,000 workers.
The department said Hurricane Katrina did not impact the August job tally, since it crossed Florida and hit the Gulf Coast after the government had surveyed employers.
Economists expect the storm, which killed an untold number of people and left thousands more homeless, will prove only a temporary set-back to the nearly $12 trillion U.S. economy. But it is expected to lead to a drop in payroll employment this month.
The decline in the unemployment rate came as a separate survey of households also found job creation robust. Analysts had expected it to hold steady at 5.0 percent.
Last month's 4.9 percent reading was the lowest since before the Sept. 11, 2001, attacks and offered a reminder that labor market conditions had been improving before Katrina struck. The unemployment rate has fallen one-half percentage point since February.
The tightening job market has been a key factor in the thinking of policy-makers at the Federal Reserve, who began pushing short-term interest rates higher in June 2004 in an effort to keep inflation tame. Ten consecutive quarter-percentage point hikes have taken overnight rates up to 3.5 percent.
The storm surge that breeched levees in low-lying New Orleans and battered other towns along the coast brought with it a sea change in expectations for further interest rate increases from the Federal Reserve.
Futures markets show investors expect just one more rate hike this year, with even another quarter-percentage point hike at the Fed's next meeting on Sept. 20 uncertain. Before Katrina, rate rises had been expected at each of the central bank's next two meetings.
The jobs report is usually eyed closely by financial markets as a potential indicator of the direction of the economy and interest rates. But an uncertain outlook in the wake of the hurricane may lessen the usefulness of the August figures.
The report showed construction payrolls grew by 25,000 - a figure surely to swell in the months ahead as rebuilding after Katrina gets under way.
The service-side of the economy created 156,000 jobs, spread across most sectors.
Average hourly earnings increased two cents, or 0.1 percent, with the year-on-year reading edging down to a 2.7 percent gain from July's upwardly revised 2.8 percent. The length of the average work week held steady at 33.7 hours. |
