NEW YORK ( TheStreet) -- The economy added 96,000 jobs in August, down from 141 in July and not nearly enough to keep pace with population growth.
The unemployment rate fell to 8.1% only because 581,000 workers quit looking for work and are longer counted in the official jobless tally.
In the weakest recovery since the Great Depression, the entire reduction in unemployment from its 10% peak in October 2009 has been accomplished through a significant drop in the percentage of adults participating in the labor force -- either working or looking for work.
The most effective jobs program appears to be to convince working-aged adults they don't need a job.Growth slowed to 1.7% in the second quarter, as consumers pulled back and the trade deficit on oil and with China continued to drag on demand. The outlook for the second half of the year is not much better. Car sales are stronger than a year ago, but are not likely to improve much further and housing prices have risen in recent months but on weak volumes. The August jobs report indicates growth remains slow in the third quarter -- likely in the range of 2% or less. Job gains were unevenly spread. Manufacturing and temporary help services lost 15,000 and 4,900 jobs, respectively, raising concerns that the recovery is sputtering and a recession is eminent. This will likely spur the Federal Reserve to take additional measures to lower interest rates but with interest rates at record lows, such action will have limited positive effects. Gainers included education, health care, professional services, leisure and hospitality, retail and wholesale trade, transportation and warehousing, financial services and information and communications. Construction added only 1,000 jobs, and federal, state and local governments shed 7,000 jobs. Gains in manufacturing production have not instigated additional improvements in employment largely, because so much of the growth is focused in high-value activity. Assembly work, outside the auto patch, remains handicapped by the exchange-rate situation with the Chinese yuan. Recent moves by China to further weaken its currency and to close its markets to stimulate its own flagging demand indicate matters will get worse without a substantive response from Washington.