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August jobs report disappoints amidst recession fears


Excitement from a robust jobs report in July gave way to a disappointing August, with the U.S. economy adding only 130,000 jobs.

WelderThat’s according to the latest release from the U.S. Bureau of Labor Statistics, which added more fuel to the anticipation of a slowdown as trade wars and other stressors take their toll on the economy. In contrast, July had a gain of 159,000 jobs, downwardly revised from the original report of 164,000. The unemployment rate was unchanged for the third month in a row at 3.7%.

“As expected, given the global slowdown in economic growth, and increasing signs of a slowing in the pace of U.S growth, we are seeing job gains cool down a bit,” said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association. “August’s 130,000 increase in jobs was somewhat supported by federal government hires for the decennial Census, with private growth of only 96,000 jobs.

“We expect that job growth will continue to wane, and that there will be some upward pressure on the unemployment rate over the next year.”

Jobless rates showed little to no change in August for major worker demographics grouped by gender, age and race. Likewise, the labor-force participation rate posted scant change, edging up to 63.2%. The number of involuntary part-time workers — people who would prefer full-time work but are unable to find those jobs, or whose hours have been reduced — grew by 4.4 million, mirroring a similar decline in July.

Job growth this year has averaged 143,000 per month, starkly lower than last year’s average of 192,000. The hiring slowdown comes in the midst of a wildly uneven economy, with a weak manufacturing sector and the muscle of consumer spending propping up the system.

“Approximately 70% of U.S. economic growth is driven by consumer spending,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “The outlook for consumer economic strength remains strong, given that jobs are plentiful and wages are rising.”

Despite the imbalance, Kushi noted that the consumer side has shown signs of enduring.

“Higher wages prompted a 2.7% increase in household income in August, the highest rate of growth since March of this year,” she said. “While [the] recent yield-curve inversion stokes the flame of recession talk, measures of the real economy — such as jobs and wage growth — remain strong. Indeed, it is household income that drives consumer spending and house buying, so it appears the U.S. consumer remains healthy and poised to spur more growth.”

Others, however, aren’t as optimistic. Per Mark Zandi, chief economist at Moody’s Analytics, “job growth is slowing sharply and if it slows any further, unemployment will rise and recession will be difficult to avoid.”

Still, as far as the real estate market is concerned, experts remain confident that the steady economy is showing enough strength to sustain itself.

“With more purchasing power and low mortgage rates, we expect to see continued strength in the housing market," Fratantoni said.

Lawrence Yun, chief economist for the National Association of Realtors, predicted that the disappointing August jobs report will provide the Fed with sufficient motivation to act on rates.

“The soft job gains in August assures that the Federal Reserve will be cutting interest rates,” he said. “The mortgage rates could fall to 3.3% before the year end.”

 

 


 

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