Unemployment rate dips even as hiring slows

U.S. employers added just 142,000 jobs in August, snapping a six-month streak of hiring above 200,000 and posting the smallest gain in eight months.

The unemployment rate fell to 6.1 percent from 6.2 percent, the Labor Department said Friday. But the rate dropped because more people without jobs stopped looking for one and were no longer counted as unemployed.

Employers also added 28,000 fewer jobs in June and July than the government had previously estimated.

The slowdown was unexpected after most recent economic data had suggested that the economy was growing at a healthy pace. Some analysts noted that other measures of the job market remain solid and that August's figures could mark just a temporary slowdown.

The figures "will inevitably spark speculation that the US recovery is somehow coming off the rails again," said Paul Ashworth, an economist at Capital Economics. "However, we're not too concerned by what is probably just an isolated blip."

The weaker-than-expected figures make it unlikely that the Federal Reserve will speed up its timetable for raising interest rates. Most analysts expect the first rate hike around mid-2015.

August's job growth was well below the average monthly increase of 212,000 over the past 12 months. Job gains have averaged 207,000 a month in the past three months, still a healthy pace.

Patrick O'Keefe, director of economic research at the accounting and consulting firm CohnReznick, said he found Friday's report puzzling. O'Keefe noted that the tepid job growth was inconsistent with surveys showing businesses and consumers gaining confidence.

He also said August's job figures tend to be unusually volatile and are typically revised later as government statisticians adjust for unusual seasonal factors such as the reopening of school and the Labor Day holiday.

The biggest drops in hiring last month occurred in retail, which shed 8,400 jobs, after gaining 21,000 in July, and in manufacturing, where employment was flat, down from a gain of 28,000 in July. Transportation and warehousing added only 1,200 jobs, after adding 19,100 in July.

Recent reports of strength in manufacturing and construction, in particular, had raised hopes that hiring in August would be solid.

Factories expanded last month at the best rate in more than three years. Factory output is being driven in part by auto sales. Americans bought more cars last month than in any other August in 11 years. And builders increased spending on construction in July by the most in more than two years.

In addition, fewer Americans are seeking unemployment benefits, which means that companies are laying off few workers.

Still, wage gains have been sluggish since the Great Recession ended in 2009, and consumers have remained cautious. Consumer spending dipped in July, the first decline since January.

In August, average hourly pay rose six cents to $24.53, 2.1 percent higher than a year ago and barely ahead of the overall 2 percent inflation rate.

U.S. exports rose in July, narrowing the trade deficit. A smaller trade deficit can boost growth because it indicates that more of the goods and services that consumers and businesses buy were made in the United States.

Those reports suggested that the economy could grow at about a 3 percent annual pace in the second half of this year. That would mark a sharp improvement from the 1.1 percent annual rate in the first half.

But the slowdown in August hiring also signals that Americans might need to spend more to boost growth and ensure that hiring remains healthy in the months ahead.