By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth slowed more than expected in August, with retail hiring declining for a seventh straight month, but strong wage gains should support consumer spending and keep the economy expanding moderately amid rising threats from trade tensions.
The Labor Department's closely watched monthly employment report on Friday also showed a rebound in the workweek as manufacturers increased hours for workers after slashing them in July. The economy's waning fortunes, underscored by an inversion of the U.S. Treasury yield curve, have been largely blamed on the White House's year-long trade war with China.
Washington and Beijing slapped fresh tariffs on each other on Sunday. While the two economic giants on Thursday agreed to hold high-level talks in early October in Washington, the uncertainty, which has eroded business confidence, lingers.
The economy is also facing headwinds from Britain's potentially disorderly exit from the European Union, and softening growth in China and the rest of the world.
The Federal Reserve is expected to cut interest rates again this month to keep the longest economic expansion in history, now in its 11th year, on track. The U.S. central bank lowered borrowing costs in July for the first time since 2008.
"It is consistent with slowing U.S. growth," said Brian Coulton, Chief Economist at Fitch Ratings in New York. "But it doesn't look anything like impending recession territory."
Nonfarm payrolls increased by 130,000 jobs last month, the government said. The economy created 20,000 fewer jobs in June and July than previously reported. Economists polled by Reuters had forecast payrolls rising by 158,000 jobs in August.
A seasonal quirk could account for last month's less-than-expected increase in employment. Over the past several years, the initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength.
But slower job growth is also in line with sharp declines in both the Institute for Supply Management's manufacturing and services industries employment measures in August. In addition, global outplacement firm Challenger, Gray & Christmas reported a 37.7% rise in planned job cuts by U.S-based employers in August.
Job gains have averaged 156,000 over the last three months, still above the roughly 100,000 per month needed to keep up with growth in the working age population. The unemployment rate was unchanged at 3.7% for a third straight month in August as 571,000 people entered the labor force.
The dollar pared losses against a basket of currencies after the report, while U.S. Treasury yields fell. U.S. stock futures trimmed gains.
Job growth has been slowing since mid-2018. Economists say it is unclear whether the loss of momentum in hiring was due to ebbing demand for labor or a shortage of qualified workers.
The government last month estimated that the economy created 501,000 fewer jobs in the 12 months through March 2019 than previously reported, the biggest downward revision in the level of employment in a decade. That suggests job growth over that period averaged around 170,000 per month instead of 210,000.
The revised payrolls data will be published next February. The government has also trimmed economic growth for the second quarter. But there was some good news in the employment report.
MANUFACTURING STRUGGLING
Average hourly earnings gained 0.4% last month, the largest increase since February, after rising 0.3% in July. But the annual increase in wages dipped to 3.2% from 3.3% in July as last year's surge dropped out of the calculation.
Wage growth has held at or above 3.0% for 13 straight month, helping to drive consumer spending and the economy.
The workweek rebounded after dropping to its lowest level in nearly two years in July. The average workweek rose to 34.4 hours in August from 34.3 hours in July. A measure of hours worked, which is a proxy for gross domestic product, increased 0.4% after falling 0.2% in July.
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, increased to 63.2% last month from 63.0% in July.
A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, rose to 7.2% from a more than 18-year low of 7.0% in July.
The slowdown in hiring last month was across all sectors, with the exception of government, which was boosted by recruitment for the 2020 Census.
Private payrolls rose by only 96,000 jobs in August. Leading the slowdown was manufacturing, where employment rose by a tepid 3,000 jobs last month after increasing 4,000 in July. The weakness was flagged by the report on Tuesday from the ISM showing its gauge of factory employment dropped in August to its lowest level since March 2016.
Manufacturing has ironically borne the brunt of the Trump administration's trade war, which the White House has argued is intended to boost the sector.
Employment growth in manufacturing has averaged 6,000 jobs per month this year compared with 22,000 in 2018. The manufacturing workweek rose 0.2 hours to 40.6 hours in August, but factories continued to reduce overtime for workers. Factory overtime fell by 0.1 hour to 3.2 hours.
Construction payrolls increased by 14,000 jobs last month after slipping by 2,000 in July. Retail employment dropped by 11,100 jobs, extending a decline that started in February.
Government employment jumped by 34,000 jobs, boosted by the temporary hiring of 25,000 workers for the 2020 decennial census. Professional and business services employment increased by 37,000 jobs last month. There were also gains in healthcare, leisure and hospitality, financial activities and wholesale trade employment. But utilities payrolls fell.