Economy adds 169,000 jobs, unemployment falls to 7.3 percent

The U.S. economy added a disappointing 169,000 jobs in August while the unemployment rate dropped to 7.3 percent, further complicating the Federal Reserve’s decision to taper its massive monetary stimulus later this month. 

{mosads}The drop in unemployment was mostly due to 312,000 fewer people in the workforce. The participation rate fell to 63.2 percent, the lowest level since August 1978, the Bureau of Labor Statistics reported Friday.

Adding to the bad news were revisions for the prior two months that show the economy added 74,000 fewer jobs in June and July. 

Figures for June were revised down to 172,000 from 188,000 and July’s numbers took a plunge to 104,000 from 162,000. 

“While it is good news when Americans find jobs, I was concerned with today’s downward revisions and the historically low labor participation rate,” said House Majority Leader Eric Cantor (R-Va.) in a statement. 

“The unemployment rate is going down, but largely because so many folks have given up hope that they could find a job if they looked for one.”

The jobless rate is at a five-year high and is down from 8.1 percent a year ago. But it is still well above the 5 to 6 percent that reflects a healthy economy and is more frustrating because it is being aided by workers dropping out of the labor market. 

Jason Furman, chairman of the Council of Economic Advisers, said the report reflects steady job gains but is a reminder that “we must continue to pursue policies that move our economy forward and restore middle class security.” 

Mark Zandi, chief economist for Moody’s Analytics, said not much has changed in the labor market, even though the latest figures were a disappointment following a stream of good economic news over the past few days. 

“I think it’s steady has she goes. I think the job market today is about the job market six months, a year and or two years ago,” he said. 

“So no real change in the job market.”

There are plenty of outside forces that could weigh on the fragile recovery. 

Action against Syria is in the forefront of the negative scenarios. 

But there is also the looming fiscal battles set to be waged on Capitol Hill this month — raising the debt ceiling and temporarily funding the government into the 2014 fiscal year. 

If Congress flirts with a government shutdown or hits the debt ceiling, “then we have a big problem that would be very destabilizing in an economy that is still pretty soft,” Zandi said. 

There is plenty of speculation that the central bank will begin tapering its $85 billion bond-buying program following its next meeting Sept. 17-18. 

A majority of economists have said that the steady economic recovery, albeit slow, would likely spur the Fed to pull back on its stimulus.

Federal Reserve Chairman Ben Bernanke has said that conditions could warrant the reduction by the end of the year. The aim would be to eventually end the stimulus by summer 2014. 

The central bank has said it would mull whether the jobless rate is dropping at a fast enough rate to cut bond purchases.