Weak job growth makes bold Fed action more likely

By CHRISTOPHER S RUGABER, AP Economics Writer

WASHINGTON (AP) — U.S. employers added 96,000 jobs in August, a tepid figure that points to the economy's persistent weakness and slowing prospects for the unemployed.

The unemployment rate fell to 8.1 percent from 8.3 percent in July. But that was only because more people gave up looking for jobs. People out of work are counted as unemployed only if they're looking for a job.

The sluggish job growth could slow the momentum President Barack Obama hoped to gain from his speech Thursday night to the Democratic National Convention.

It could also make the Federal Reserve more likely to unveil a new bond-buying program at its meeting next week. The goal would be to lower long-term interest rates to encourage borrowing and spending.

Hourly pay fell in August, manufacturers cut the most jobs in two years and the number of people in the work force dropped to its lowest level in 31 years. The government also said 41,000 fewer jobs were created in July and June than first estimated.

FED LIKELY TO ACT

Will the Federal Reserve go big next week?

Most economists say they expect the Fed to announce action to try to stimulate the economy. And many now think the Fed will make the boldest move it can -- a third round of bond buying to try to lower long-term interest rates.

This is known as quantitative easing.

"If there was any lingering doubt within the Fed about announcing a new round of quantitative easing next week, this should surely push them over the edge," said Tom Porcelli, an economist at RBC.

Nigel Gault, chief U.S. economist at IHS Global Insight, thinks the Fed will focus any new purchases on mortgage-backed securities to try to lower mortgage rates and boost the fledgling housing recovery.

-- Martin Crutsinger, AP Economics Writer

SHRINKING WORK FORCE

The unemployment rate declined in August, but for a bad reason: The government doesn't count people as unemployed if they've stopped looking for a job.

The number of people working or looking for work shrank in August by 368,000, the government said. The reasons vary, economists say.

Many people, after months of looking for a job without success, give up. But this group of "discouraged" workers doesn't fully capture the phenomenon.

New parents, for example, may quit a job to focus on raising children.

An older worker who's laid off may claim Social Security benefits instead of looking for a new job.

And there's also a demographic shift underlying the trend: Baby boomers are retiring.

The result is that the percentage of working-age Americans with a job or looking for one has dropped to 63.5 percent, a 31-year low.

-- Christopher S. Rugaber, AP Economics Writer

WHO'S UNEMPLOYED?

When the government surveys 60,000 U.S. households each month to determine the unemployment rate, it doesn't actually ask anyone if they're unemployed.

Instead, Census workers ask a series of questions, in phone or in person. Some are detailed. For example:

Do you own a business?

Did you work for pay? If not, did you provide unpaid work for a family business or farm? (Those who did are considered employed.)

Only then are the survey participants asked whether they had a job and, if so, whether it was full- or part-time.

The government's definition of unemployed is someone who's out of work and has actively looked for a job in the past four weeks.

Those without jobs who haven't looked in the past month but did look in the past year are considered "marginally attached" to the work force.

- Christopher S. Rugaber, AP Economics Writer

GOVERNMENTS HURTING, NOT HELPING

In normal recoveries, government hiring helps economies recover from recessions.

Not this time.

When you count the 7,000 public-sector jobs lost in August, governments at all levels -- federal, state and local -- have slashed 670,000 jobs since the recession ended in June 2009. By contrast, private companies have added 3.5 million jobs.

It's the first time since World War II that governments have shed jobs this deep into an economic recovery. At this point -- three years and two months -- into the nine previous postwar recoveries, government jobs had risen an average 8 percent.

This time, they're down 3 percent.

-- Paul Wiseman, AP Economics Writer

OBAMA'S BREAK-EVEN MILESTONE

Here's a milestone that's difficult for President Barack Obama to brag about: There are 133.3 million Americans working -- 261,000 short of the number when he was inaugurated in January 2009.

At this year's pace of job creation, payrolls would return to that level in October. And the job totals would be released Nov. 2 -- four days before the election.

Of course, any comparison of now vs. then must take into account the huge numbers of jobs lost -- and then gained -- in between.

-- Paul Wiseman, AP Economics Writer

BIG HOLE TO FILL

The U.S. job market still has miles to go just to get back to where it was before the Great Recession.

The economy lost nearly 8.8 million jobs from the time employment peaked in January 2008 until it bottomed in February 2010.

Including the 96,000 jobs added in August, the United States has regained fewer than 4.1 million jobs, or 46 percent, of those lost jobs. Which helps explain why this is by far the feeblest recovery since World War II.

-- Paul Wiseman, AP Economics Writer

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