The U.S. economy added a disappointing 130,000 jobs in August, the Labor Department said Friday, heightening fears that President Donald Trump’s trade war is starting to bite and the U.S. economy is hitting a rough patch.
Economists had predicted 160,000 job gains in August. Business owners say they are struggling to find people to hire, and they are growing increasingly nervous about Trump’s trade battle. The unemployment rate remained at 3.7 percent, the lowest in nearly half a century, forcing employers to search harder for new workers.
Right now, the United States is a tale of two economies: The service sector remains strong with health care and business adding a lot of jobs in August. But industries such as mining and manufacturing that depend heavily on selling items overseas are struggling. Manufacturing is already in a recession, and the sector has added few jobs this year, a trend that continued in August. Mining employment fell by 6,000 jobs.
Hiring in August was also boosted heavily by the U.S. government adding 25,000 temporary workers to its payrolls for the 2020 Census.
Most companies have already scaled back spending on buildings and equipment, and there is concern that they will now cease hiring, a move that could have harmful consequences on the U.S. economy, as consumer spending drives so much of the U.S. economy. When Americans are fearful of losing their jobs, they tend to halt spending.
So far this year, job gains have averaged 143,000 a month, a noticeable downgrade from last year, when job gains averaged 192,000 a month.
“While I’m not concerned about a downturn lurking just around the corner today, it remains a very real possibility further down the line,” said Steve Rick, chief economist at CUNA Mutual Group, in an email.
For now, Americans are spending because “we’re hiring!” signs still appear plentiful in many towns and pay is rising at many companies. Wages grew at an annual pace of 3.2 percent in August, well above inflation and a slightly better-than-expected pace. The number of hours employees are working also rose, a sign of strength that companies are asking workers to stay later.
Trump announced in August that he would put tariffs on nearly all Chinese imports by the end of the year, a major escalation of the trade war that has left many retailers and manufacturers trying to figure out what to do ahead of the big holiday shopping season.
While many company leaders blame Trump for heightened uncertainty, the president says the Federal Reserve is the reason growth is slowing in the United States. He tweeted shortly before the jobs numbers came out that the Fed should lower interest rates.
“I agree with @jimcramer, the Fed should lower rates. They were WAY too early to raise, and Way too late to cut – and big dose quantitative tightening didn’t exactly help either. Where did I find this guy Jerome? Oh well, you can’t win them all!” Trump wrote.