US jobs growth has slowed more than expected in August, setting the stage for the Federal Reserve to pump additional money into the economy next week.
Non-farm payrolls increased by only 96,000 last month, the Labour Department said on Friday.
While the unemployment rate dropped to 8.1 per cent from 8.3 per cent in July, it was largely due to Americans giving up their search for work.
The report’s weak results were also underscored by revisions to June and July data showing 41,000 fewer jobs created than previously reported.
The labour force participation rate, or the percentage of people who either have a job or are looking for one, fell to 63.5 per cent – the lowest since September 1981.
The report keeps the pressure on Barack Obama ahead of November’s presidential election in which the health of the economy looms large.
The unemployment rate peaked at 10 per cent in October 2009, but progress reducing it stalled this year, threatening Obama’s bid for a second term.
In his first campaign event following his convention speech Thursday, Obama said the rate of job creation was “not good enough. We know it’s not good enough. We need to create more jobs faster. We need to fill the hole left by this recession faster.”
“We need to come out of this crisis stronger than when we went in. And there’s a lot more that we can do.”
Obama told a 6,000 strong crowd here that Americans needed to press Republicans in Congress to unblock his jobs plan, which he says would find work for one million people, which has been stuck on Capitol Hill for months.
However, Mitt Romney, Obama’s Republican challenger said the figures were “disheartening for the American people” at campaign events in Iowa.
“If last night was the party, this morning is the hangover,” the former Massachusetts governer said in a statement.
“It is clear that President Obama just hasn’t lived up to his promises and his policies haven’t worked. We aren’t better off than they were four years ago.”
Al Jazeera’s Alan Fisher, reporting from the Chamber of Commerce in Washington DC said that while Obama’s administration has been asking the public to rate him on his track record and has been constantly talking about jobs, the results indicate that many people have given up the job search.
“Creating 96,000 jobs is not nearly enough to take in the population growth of the number of people that start looking for jobs each month,” said Fisher.
Fisher said the Republicans were bound to sieze on this figure.
“The Republicans … will use the 96,000 figure as the stick to beat Obama with.”
“8.1 per cent is a good headline figure, but … with only 96,000 new jobs created in a country the size of America, you can understand why the Republicans think this is an importabt figure and why they think it is one that Obama will not be able to defend very well,” said our correspondent.
Economists polled by the Reuters news agency had expected payrolls to rise 125,000 last month, but some had pushed their forecasts higher on Thursday.
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 eight per cent for more than three years – the longest stretch since the Great Depression.
Ben Bernanke, chairman of the Federal Reserve, last week said the labour market’s stagnation was a “grave concern,” a comment that raised expectations for a further easing of monetary policy when the central bank meets on Wednesday and Thursday.
Speaking to Al Jazeera, Chris Townsend, from the United Electrical Workers Union, said that the jobs figure that comes out as frequently as it does really does not reflect the real job situation.
“What we have in the US is a long-term steadily deteriorating job situation,” he said.
“It’s very distressing, because we continue to lose good jobs and at the same time we haven’t found the political will to confront the corporate forces that deal with the quality of the jobs that we are creating.”
Townsend said that while the Republican candidate, Romney touts a successful low wage, service economy company in his election campaiging, in which, jobs creation is high on the agenda, the Obama administration has shown little political will to tackle “job cutters, which are the large conglomerates, who continue to cut millions of the very best manufacturing and service jobs in the past few years … and only some of them have been replaced by low wage service occupation.”
He said that working people face a political moment where they are in dire need of a more serious and a more realistic “job creation strategy that should start with a more serious and a more realistic job creation strategy”.
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.
The weak report makes it more likely that the Federal Reserve will launch a third round of bond purchases next week.
Since the beginning of the year, job growth has averaged 139,000 per month, compared with an average monthly gain of 153,000 in 2011.
Economists blame fears of the so-called US fiscal cliff – the $500bn or so in expiring tax cuts and government spending reductions set to take hold at the start of next year unless Congress acts – and Europe’s long-running debt problems, for the slowdown in hiring.
Job creation last month was weak across the board, with manufacturing payrolls down 15,000, the first decline since September last year.
Factory jobs were inflated in July because car manufacturers kept plants running when they would normally shut them for retooling, economists said.
There was little improvement in construction employment, which added 1,000 jobs. Temporary hiring fell 4,900, declining for the first time since March.
Utilities payrolls saw a snap back, adding 8,800 after being depressed by the strike of about 9,000 workers in July.
Government payrolls declined 7,000, falling for a sixth straight month.
Average hourly earnings fell one cent last month, highlighting the underlying weakness in the labour market.