US economy creates 96,000 jobs but figure disappoints

Worker at Ford factory The job creation figure was lower than expected

The US economy created 96,000 jobs in August, according to official figures from the Bureau of Labor Statistics.

However, the figure was lower than expected and revisions to June and July data mean that 41,000 fewer jobs were created than previously reported.

Analysts had expected non-farm payrolls to grow by 125,000 last month.

The unemployment rate fell to 8.1%, compared with 8.3% in July, but only because more people gave up looking for work.

Weak growth

Employment increased in food services and drinking places, professional and technical services and healthcare during August, the Bureau said.

Analysis

The weak US jobs picture isn't just a headache for the White House, it's also a problem for the Federal Reserve.

With unemployment so high, Fed officials are under pressure to do something about it.

America's top banker, Ben Bernanke hinted at further action to boost the economy when he spoke in Jackson Hole last week. But he also said that the hurdle for further stimulus was higher.

The disappointing jobs report may now have cleared the Fed's way.

So what might it do at its policy meeting next week?

The Federal Reserve could launch a third round of quantitative easing - buying up US debt in an effort to lower interest rates and to stimulate the flagging economy.

While that's what financial markets would like to see happen, the Fed already has a problem. Republican vice presidential nominee Paul Ryan has immediately taken to the US networks saying more action by the Fed would be a bad idea.

During election season, the Fed's uneasy perch outside of party politics becomes ever more precarious.

Employment growth has averaged 139,000 a month in 2012, the Bureau said, compared with an average monthly gain of 153,000 in 2011.

The percentage of Americans who either have a job or who are looking for one fell to 63.5%, the lowest participation rate since 1981.

The weak figures could put pressure on President Barack Obama in his re-election campaign, given than rival Mitt Romney has put jobs at the centre of the national debate.

Mr Romney described the figures as "more of the same for middle-class families who are suffering through the worst economic recovery since the Great Depression".

He claims his economic plan will create 12 million new jobs by the end of his first term.

The figures are also seen as making it more likely that the US Federal Reserve will provide further economic stimulus measures in the form of quantitative easing, as hinted at by chairman Ben Bernanke in a speech on 31 August.

A survey released on Tuesday indicated that growth in the US manufacturing sector remained weak.

The Markit Manufacturing Purchasing Managers' Index came in at 51.5 in August compared with 51.4 in July. A reading above 50 indicates growth.

Figures released last week showed that the US economy grew at an annualised pace of 1.7% in the second quarter of the year.

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