US employers cut back sharply on hiring last month, crushing hopes that the job market was improving and putting more pressure on the US Federal Reserve to give the sluggish economy another jolt.
The US Labor Department said on Friday that employers added just 96,000 jobs last month, down from 141,000 in July and too few to keep up with population growth.
The unemployment rate fell to 8.1 percent from 8.3 percent, but only because many people gave up looking for work and therefore were not counted in the government’s calculation.
The disappointing numbers are a blow to US President Barack Obama’s re-election campaign. Unemployment is down from a peak of 10 percent in October 2009, but no incumbent president since Franklin D. Roosevelt has faced re-election with unemployment higher than 7.8 percent.
The percentage of Americans in the workforce dropped to its lowest level in 31 years.
The economy remains hobbled in the aftermath of the deepest recession since the 1930s and simply is not expanding fast enough to spark more hiring. Consumers, whose spending accounts for more than two-thirds of economic activity, have been spending cautiously. The government reported last week that economic growth clocked a disappointing 1.7 percent annual pace in the April-June quarter.
The economy is expected to grow at an annual rate of around 2 percent for the rest of the year, consistent with only 90,000 new jobs a month.
Republican presidential challenger Mitt Romney declared that “the weak jobs report is devastating news for American workers and families ... a harsh indictment of the president’s handling of the economy.”
Obama said last month’s hiring was “not good enough” and that it is “a long tough journey” to recover from the recession that officially ended more than three years ago.
The job market got off to a strong start this year. Employers added an average 226,000 jobs a month from January through March.
However, they could not sustain that pace, and hiring slowed to a monthly average of 67,000 from April through June.
It looked like things got back on track in July, when the government initially reported 163,000 new jobs, but the Labor Department revised those gains down by 22,000 on Friday.
Last month’s jobs report looks even uglier upon closer inspection. The unemployment rate fell because 368,000 Americans dropped out of the workforce.
“A declining labor force is not [a] sign of an improving economy,” said Joel Naroff, president of Naroff Economic Advisors.
Hourly pay fell. Manufacturers cut 15,000 jobs, the most in two years. And temporary help jobs, which often signal where the job market is headed, dropped by 4,900 last month.
The downbeat jobs news convinced many economists that the US Fed will come to the rescue.
At its last meeting, the Fed’s policy committee decided that action “would likely be warranted fairly soon” unless it saw evidence of “a substantial and sustainable strengthening” of the economy.