Job growth was less than expected in August as the U.S. economy added 169,000 positions, raising questions over whether the Federal Reserve will begin a pullback on its historically easy monetary policy.
The Bureau of Labor Statistics also said the unemployment rate dropped to 7.3 percent, its lowest since December 2008, but due primarily to fewer Americans in the labor force.
A more encompassing rate that counts the underemployed and those who have quit working also fell, dropping to 13.7 percent.
That’s a bit deceptive. The labor force shrank by almost half a million people. That’s people retiring, going to school or giving up completely. And revisions to previous months cancelled out some of this month’s gains
It should be pointed out that the predictions from every economist in the country was that things would be far, far worse. Sequestration, recision, tax hikes and the 40% reduction in the deficit was supposed to plunge the economy back into a depression. As disappointing as Q2 and Q3 have been, they’ve actually been better than Q1 and better than the pundits were predicting before they abandoned their “Republicans are wrecking the economy” narrative in favor of the “Obama is saving the economy” narrative.
I think a big reason the economy is stagnant instead of crashing is because of the closing of the deficit. The likelihood of default is lower, we are closing in on a sustainable fiscal path, there is talk of entitlement reform and we haven’t had a self-created fiscal crisis in a few months. That’s creating a lot more certainty in the markets; more than enough to counter any supposed baleful influence of spending cuts.
That having been said, “economy not crashing” is not the same as “economy doing well”. This was not a good jobs report. If we want an actual recovery, we need to continue to hack at the deficit, fix-delay-repeal parts of Obamacare, overhaul the tax code and overhaul regulations. There doesn’t appear to be a lot of momentum for that on Capital Hill. But we can always hope.