MARY LOUISE KELLY, HOST:
U.S. employers hired fewer workers last month. The Labor Department says employers added just 130,000 jobs in August, and that is fewer than forecasters were expecting. The number would have been even weaker had it not been for the hiring of 25,000 temporary census workers.
That jobs report is another sign of an economy that's been tapping the brakes. NPR's Scott Horsley is here.
SCOTT HORSLEY, BYLINE: Hi, Mary Louise.
KELLY: So how should we square this? Slowdown in job growth - on the other hand, the unemployment rate is still very low - right? - 3.7%.
HORSLEY: That's right. So the slowdown in job growth could be a normal sign of an economy that's at or near full employment. We often hear from employers who say they're having trouble finding workers to fill the job openings.
But it's also likely we're seeing some fallout from the ongoing trade war and the slowdown in global demand. The manufacturing sector in particular is vulnerable to that kind of fallout. And factories added only 3,000 jobs last month. The factory numbers for June and July were also revised down. Now that's consistent with some of the other economic indicators we got this week, which together paint a picture of a manufacturing sector that actually shrank last month for the first time in three years.
KELLY: So if overall the economy is tapping the brakes, as we put it, does that mean a recession is looming?
HORSLEY: Not necessarily. All indications are the U.S. economy is still growing. It's just growing more slowly than it was, say, a year ago. While the Trump administration talks a lot about manufacturing, it's important to keep in mind factories are a relatively small part of the overall economy. They represent about 8% of jobs, about 11% of GDP. Economist Jared Bernstein, who's with the left-leaning Center on Budget and Policy Priorities, says that's about a third of what factories represented a few decades ago. So a slowdown in manufacturing doesn't necessarily have to drag down the broader U.S. economy.
JARED BERNSTEIN: It's not pretty, and it's not something I like to see. And it's a totally self-inflicted wound, so it's really dumb. But I don't know that it's recessionary at this point.
HORSLEY: Now that said, we are also seeing some slowdown in the larger services side of the economy - things like health care and finance, radio reporters. The economy added less than two-thirds as many services jobs in August as in the two previous months. And what's more, we continue to see job losses in the retail sector. There were 11,000 fewer retail jobs in August. Even though consumers are still spending money, they're just not spending in a lot of traditional stores.
KELLY: Was there anything good in this jobs report, Scott?
HORSLEY: Yeah, there were some encouraging signs. The labor force participation rate ticked up. More than half a million new people came into the workforce. That's encouraging. It means people who've been on the sidelines are seeing opportunities in this tight job market.
We've also seen some acceleration in wage growth and a very slight increase in the average workweek. So you've got more people working more hours and making more money. That means consumers will have some spending power. And because consumer spending is such a big part of the economy, that should keep things afloat even if we're growing more slowly.
KELLY: All right, so we keep talking about growing more slowly, slowdown and so on. Does it follow that the Federal Reserve may roll into the rescue, cut interest rates in the coming days, months?
HORSLEY: You know, the Fed was already expected to cut rates by a quarter point at its next meeting in less than two weeks. And I don't think anything in this report's going to change that expectation. Fed Chairman Jerome Powell admitted to an audience in Switzerland, though, today we are in a kind of gray area. And there is some disagreement among his colleagues about just how much medicine the U.S. economy needs.
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JEROME POWELL: There'll always be questions about how much to do and how fast to move and things like that. But sometimes, things are relatively clear. Other times, it's murky out there. There is a range of views, and I think this is one of those times.
HORSLEY: Still, Powell stressed the central bank is committed to using its tools to prolong the now decade-old economic expansion.
KELLY: Thank you, Scott.
HORSLEY: You're welcome.
KELLY: NPR's Scott Horsley.
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