Job growth continued at a tepid pace in August, with nonfarm payrolls increasing by just 130,000 thanks in large part to the temporary hiring of Census workers, the Labor Department reported Friday.
The increase fell short of Wall Street estimates for 150,000, while the unemployment rate stayed at 3.7%, as expected. An alternative measure of the jobless rate, which includes discouraged and underemployed workers, increased to 7.2% from 7% in July, due mainly to a 397,000 increase in those working part-time for economic reasons.
Wage growth remained solid, with average hourly earnings increasing by 0.4% for the month and 3.2% over the year; both numbers were one-tenth of a percentage point better than expected.
Labor force participation also increased, rising to 63.2% and tying its highest level since August 2013. The total number of Americans considered employed surged by 590,000 to a record 157.9 million, according to the household survey, which is conducted separately from the headline establishment count.
The difference between the two surveys inspired some optimism.
"If we weren't already talking about recession risk and already looking for signs of a slowdown, we wouldn't start today because of this jobs report," said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
"On balance, I come down on the optimistic side. I think it's a pretty good jobs report," Clemons added.
Similarly, Paul Ashworth, chief U.S. economist at Capital Economics, said that aside from the weak headline establishment count, "the rest of the employment report was actually quite positive."
With the previous June and July reports revised lower as well, monthly job growth in the U.S. has slowed to just 158,000, compared with 223,000 per month a year ago.
The decline comes amid concerns that the U.S. economy is slowing and perhaps even heading for recession. While consumers remain strong, agriculture and manufacturing have declined as the U.S. engages in a protracted tariff battle with China.
On the labor front, August's trends showed more slowness.
The biggest gains for the month came from professional and business services at 37,000 and the federal government, which added 28,000 workers ahead of the 2020 population count. Health care contributed 24,000 to the total while financial services increased by 15,000.
Despite otherwise strong retail indicators, the sector saw a net decline in workers of 11,100. Trade, transportation and utilities also lost 11,000 jobs, and mining and logging lost 5,000 positions.
Excluding government hiring, private payrolls grew by just 96,000, the lowest pace since February.
Revisions to previous months' counts saw June cut from 193,000 to 178,000 while July fell from 164,000 to 159,000. That brought the three-month average down to 156,000.
Recession fears have grown on Wall Street even though the economy has maintained a growth rate around 2% after hovering around 3% a year ago. Bond markets have been pricing in a slowdown, and the Federal Reserve in July approved its first rate cut since the Great Recession.
Markets widely expect the central bank to follow through with a another quarter-point reduction later this month. Fed officials have expressed concern about a weakening global picture infecting the U.S., along with the impact of the trade war and a persistent lack of inflation.
Fed Chairman Jerome Powell, at a forum in Zurich hours after the jobs report, described the labor market as being in "quite a strong position" and the consumer to be "strong."
There had been some question as to whether the central bank might even get more aggressive and approve a half-point cut. However, the jobs report seemed to take that off the table, at least in the market's eyes. Traders were pricing on a 93.5% chance of a quarter-point reduction, and there is now even a 6.5% chance the Fed stays put, according to the CME.
"In the sense of the domestic fundamental economics, it doesn't warrant the Fed lowering interest rates," Clemons said.