WASHINGTON — The U.S. economy is producing jobs at a subpar pace — a trend the Federal Reserve will weigh in deciding this month whether to slow its bond buying and, if so, by how much.
Employers added 169,000 jobs in August but many fewer in June and July than previously thought, the Labor Department said Friday. Combined, June, July and August amounted to the weakest three-month stretch of job growth in a year.
The unemployment rate dropped to 7.3 percent, the lowest in nearly five years. But it fell because more Americans stopped looking for work and were no longer counted as unemployed. The proportion of Americans working or looking for work reached its lowest point in 35 years.
The jobs picture is sure to weigh heavily when the Fed meets Sept. 17-18 to discuss whether to scale back its $85 billion a month in Treasury and mortgage bond purchases. Those purchases have helped keep home-loan and other borrowing rates ultra-low to try to encourage consumers and businesses to borrow and spend more.
David Jones, chief economist at DMJ Advisors, said he still thinks the Fed will begin slowing its bond buying later this month. But he suspects the August data and the reduced job totals for June and July will lead the Fed to trim more gradually than it would have otherwise: The Fed could start reducing its monthly purchases by $10 billion rather than $20 billion.
Jones said he expects reductions of $10 billion between now and mid-2014. At that point, Chairman Ben Bernanke has said the Fed expects the bond buying could likely end.
The revised job growth for June and July shrank the previously estimated gain for those months by a combined 74,000. July's gain is now estimated at 104,000 — the fewest in more than a year and down from the previous estimate of 162,000. June's was revised to 172,000 from 188,000.
In the past three months, employers have added an average of just 148,000 jobs. The average monthly gain for 2013 so far is 180,000, almost identical to the 183,000 average for 2012.