Job growth for both June and July was also revised lower, by a total of 74,000 jobs.
Meanwhile, the unemployment rate fell to 7.3%, but the decline came for the wrong reasons, as 312,000 people dropped out of the labor force. Only 63.2% of Americans now participate in the labor force — meaning they have a job or are looking for one. That’s the lowest rate since August 1978.
The report was being closely watched for signs that the Federal Reserve will begin pulling back on its controversial bond-buying program later this month. The Fed has said that the timing of the “tapering” would depend heavily on improvement in the labor market.
“This report doesn’t help the case for tapering, but the Fed will keep in mind how volatile these data are,” said Jim O’Sullivan, chief U.S. economist for High Frequency Economics. “When they look at the full weight of evidence, they’ll conclude there’s been no significant change in the last few months. I think they will go ahead with the tapering in September.”
Overall, the trend remains the same: Modest hiring has continued at a rate of about 184,000 jobs a month for the last year, but that’s not nearly fast enough for the 11.3 million people who remain unemployed.
The economy needs at least 200,000 new jobs a month just to keep pace with population growth.