By Jason Lange and Heather Timmons
WASHINGTON (Reuters) - U.S. job growth slowed more than expected in August, reflecting the U.S. trade war with China and raising expectations for a Federal Reserve rate cut this month.
Nonfarm payrolls rose by 130,000, some 28,000 less than analysts expected and a 29,000 drop from July, but average hourly earnings increased slightly and jobless rates remained steady.
“It’s a mixed report at best," said Nela Richardson, investment strategist with Edward Jones in St. Louis. "It confirms what we knew, that the economy is decelerating."
FACTORY SLUMP
In a sign the trade war was dragging on the economy, employers added 3,000 factory jobs in August, less than half the expected 8,000 jobs and down from July's 4,000-job increase. Manufacturing "is the sector to watch for the connection between trade uncertainty and the real economy,” Richardson said.
Transportation and warehousing jobs, which feel knock-on effects from trade and manufacturing, dropped by 0.5%.
(Graphic: trade war link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5823/5757/trade_war.png)
Retail jobs dropped for the seventh straight month in a row, indicating that U.S. retailers could be more troubled that expected. "I know we just passed Labor Day but they just continue to shed jobs like nobody’s business," said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.
(Graphic: retail_woes link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5821/5755/retail_woes.png)
"PRETTY DARN GOOD SHAPE"
Federal jobs rose by 34,000, boosted mostly by a 25,000 new temporary jobs related to the U.S. 2020 Census. "That is not repeatable," said Kinahan. "So that is a one-month little bump, so that gives you maybe a little bit of concern."
U.S. officials said the report showed President Donald Trump's policies were a success. "America is working," Larry Kudlow, the White House economic advisor, told Bloomberg after the report was published. "We're in pretty darn good shape."
WOMEN LEAD
One bright spot was an increase in the number of women of prime working age who either have jobs or are looking for one. Female participation drove a rebound in overall labor force participation, which increased by 0.2% in August to 63.2%. Participation by women age 25 to 54 jumped a full percentage point to 76.3%.
(Graphic: Women_lead link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5824/5758/Women_lead.png)
“In the last few years of the expansion, we’ve seen women really lead the way when it comes to labor force participation,” said Nick Bunker, an economist at the Indeed Hire Lab. Women make up a disproportionate share of workers in some sectors that are seeing strong job gains, such as health care and education, he said.
MORE HOURS
While job growth slowed, American employees worked more hours. The Labor Department said an index of hours worked across the economy rose 0.4% in August. Growth in that index, which economists treat as an early indicator of economic growth, has been cooling for much of this year.
This reading could point to slower growth, rather than a sharp turn toward economic contraction.
(Graphic: agg_houres link: https://fingfx.thomsonreuters.com/gfx/mkt/12/5820/5754/agg_hours_gdp.png)
RATE CUT AHEAD Stock markets rose in early trading as the weak report made investors even more convinced that the Federal Reserve will cut interest rates by 25 basis points on at its Sept. 17-18 policy meeting.
"This report isn’t going to change what the Fed is going to do this month," predicted Bill Merz, the head of fixed income research at U.S. Bank wealth management in Minneapolis.