WASHINGTON – Employers sliced payrolls by 4,000 in August, the first drop in four years, a stark sign that a painful credit crunch that has unnerved Wall Street is putting a strain on the national economy.
The latest snapshot of the employment climate, released by the Labor Department on Friday, also showed that the unemployment rate held steady at 4.6 percent, mainly because hundreds of thousands of people left the work force for any number of reasons.
Job losses in construction, manufacturing, transportation and government swamped gains in education and health care, leisure and hospitality, and retail. Employment in financial services was flat. The weakness in payrolls reflected fallout from the deepening housing slump, a credit crisis and financial turbulence that has made businesses more cautious in their hiring.
The report was much weaker than economists were expecting. They were forecasting payrolls to grow by 110,000.
The drop of 4,000 jobs in August was the first and largest decline since August 2003.
The surprisingly weak report provides the Federal Reserve with a reason to lower interest rates when it meets next on Sept. 18.
Federal Reserve Chairman Ben Bernanke, in a speech last week, said the Fed stands ready to do all that is needed to keep the credit crunch that has rocked Wall Street from damaging the economy.
Economists increasingly believe the Fed will lower a key interest rate, now at 5.25 percent, by at least one-quarter percentage point on Sept. 18, its next meeting. The Fed has not lowered this rate in four years.