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U.S. Jobless Rate Drops for the Worst of All Reasons

96,000 jobs in August
U.S. Jobless Rate Drops for the Worst of All Reasons
Photograph by Sandy Huffaker/Getty Images

The U.S. economy added just 96,000 jobs in August, falling short of expectations and showing that with a presidential election just two months away, the nation still has a long ways to go to heal from the deep 2007-09 recession. The unemployment rate fell to 8.1 percent from 8.3 percent, but that was only because 368,000 people left the labor force. The share of working-age people who are either working or looking for work—known as the labor-force participation rate—fell to its lowest level since September 1981.

Stock and bond prices rose after the report came out, but it wasn’t because traders felt cheerful about the economy. Just the opposite: They concluded that the lousy report increased the likelihood that the Federal Reserve would further ease monetary conditions at its next meeting Sept. 12-13. Easy money is reliably good for the financial markets, even if it doesn’t quickly translate into stronger economic performance. “It’s just this new upside-down world of investing that we’re living in where bad news is good news for assets,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, told Bloomberg.