Sep. 7, 2012 at 8:43 AM ET
Job creation slipped further into the doldrums last month, heightening worries about the state of the recovery and adding to the hurdle President Barack Obama needs to leap to win re-election in November.
The Labor Department reported Friday that the economy created a tepid 96,000 jobs in August, well below the 125,000 expected by economists and a far stretch from the plus-250,0000 needed to show robust growth. The unemployment rate slid to 8.1 percent from 8.3 percent as more Americans gave up looking for work.
The data was further evidence of a Goldilocks economy -- not too hot, not too cold, but not just right either -- that could prompt the Federal Reserve to take new steps to boost growth.
"This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week. QE will boost equities, damage the dollar and do little for the economy, but what else can an activist Fed do? " said Joseph Trevisani, chief market strategist at Wordwide Markets.
The report's weak tenor was also underscored by revisions to June and July data to show 41,000 fewer jobs created than previously reported. The labor force participation rate, or the percentage of Americans who either have a job or are looking for one, fell to 63.5 percent -- the lowest since September 1981.
The elevated jobless rate has put the economy front and center in the race for the White House, endangering Obama's hopes for a second term. The weak jobs report could rob Obama of any momentum he hoped to gain with his speech at the Democratic National Convention on Thursday.
"If last night was the party, this morning is the hangover," Obama's Republican opponent, former Massachusetts Gov. Mitt Romney, said in a statement after the jobs report.
The White House tried to put a positive spin on the data, pointing out that 103,000 jobs were created in the private sector for the 30th consecutive month of growth. But Alan Krueger, the chairman of the White House Council of Economic Advisers, echoed one of Obama's themes from his speech Thursday night by saying that more work needed to be done.
The economy has experienced three years of growth since the 2007-09 recession, but the expansion has been grudging and the jobless rate has held above 8 percent for more than three years -- the longest stretch since the Great Depression.
Fed Chairman Ben Bernanke last week said the labor market's stagnation was a "grave concern," a comment that raised expectations for a further easing of monetary policy as soon as the central bank's meeting on Wednesday and Thursday.
"The economy is growing at a steady pace, but nothing to write home about and that is why I think the Fed will announce some sort of bond buying program next week," said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California.
The jobless rate peaked at 10 percent in October 2009, but progress reducing it stalled this year, threatening Obama's bid for a second term. An online Reuters/Ipsos poll on Thursday gave Republican Challenger Mitt Romney a 1-point edge on Obama, 45 percent to 44 percent.
The lack of headway putting Americans back to work has also put the question of further monetary stimulus on the table at the Fed. The central bank has held interest rates close to zero for nearly four years and pumped about $2.3 trillion into the economy through two bouts of bond buying.
Reuters contributed to this report.
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