After months of positive jobs reports, the August numbers were a bit of a let down. Over 142,000 jobs were created, ending a stretch of 6 straight months of gains over 200,000. The unemployment rate dropped to 6.1%.
The numbers surprised analysts, as most data points to an economy that continues to grow. CNBC’s Jim Cramer even called the weak numbers an aberration. The numbers are subject to change in future revisions.
Retail was a source of weakness in the report. Roughly 8,400 retail jobs were lost in August. The sector gained over 21,000 jobs in July. Manufacturing was flat, while transportation and warehousing added only 1,200 jobs.
While the economy has been strong the past 12 months, adding about 212,000 jobs per month, there are still fundamental problems that need to be fixed. Wages are rising far to slowly, leading to consumers being overly cautious. With the US being a consumer driven economy, this has handicapped the economy since the 2008-2009 recession.
Another issue that could derail the economy in the coming months is the threat of another government shutdown. Some Republicans have hinted that they may support such a maneuver if their budget demands are not met. Republicans are favored to maintain control of the House, and gain control of the Senate in the coming 2014 midterm elections, making the threat of a government shutdown very serious.
Government spending has already been a big problem for the economy, but not in the way most media outlets have portrayed it. While the federal government’s debt is a problem in the long term, austerity measures passed in recent years are an even bigger problem in the short term. Government spending is a huge part of the economy, and cuts have weakened the recovery from the 2009 recession. If government hiring had kept pace with historic norms the past few years, we would have already returned to near full employment.
While the August report is disappointing, there is no reason to believe it is the beginning of a downward trend yet. Most other economic indicators point towards continued growth for the rest of this year. The weak numbers are also likely to prevent the Federal Reserve from accelerating a planned interest rate hike, which is expected sometime next year. Until other economic data points towards a slowdown, Cramer might be right that this report is merely an aberration.