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August Job Growth Tanks; Unemployment Rate Dives

The U.S. Department of Labor released its August payroll and unemployment data Friday morning, and the data could toss a monkey wrench into arguments that the economy is ready for an interest rate hike. The Labor Department reported nonfarm payrolls grew by 173,000 jobs in August, far below a consensus estimate of 223,000 new jobs.

The August unemployment rate fell from 5.3% in July to 5.1%, its lowest level in seven years.

Average hourly earnings rose eight cents in August to $25.09, up about 0.3%, compared with a consensus estimate of 0.02%. Hourly earnings have increased by 2.2% over the year.

Nonfarm payroll employment for June was revised from a prior addition of 231,000 jobs to a new total of 245,000, and the July total of 215,000 has also been revised upward to 245,000. The three-month average works out to 221,000 jobs added per month.

The average hours worked per week increased by 0.1 hours to 34.6 hours. The manufacturing workweek was unchanged at 40.8 hours, and factory overtime edged down by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours.

Manufacturing employment dropped by 17,000 in August with losses of 7,000 jobs in both the fabricated metal products sector and the food manufacturing sector. Employment in the mining sector, which includes oil and gas workers, dropped 9,000 in August. The mining sector has lost 90,000 jobs since December.

Health care and social assistance jobs rose by 56,000 in August, with health care accounting for 41,000. Over the year, health care jobs have risen by 457,000 and social assistance jobs are up 107,000.

The dive in the unemployment rate and the solid average growth in new jobs strengthens the argument for those like Richmond Fed president Jeffrey Lacker, who argue for an interest rate hike sooner rather than later. The futures markets reacted negatively to the report, indicating perhaps that they too see a rate hike coming.

ALSO READ: Richmond Fed’s Lacker Wants Rate Hike ‘Sooner Rather Than Later’

By Paul Ausick