The Department of Labor reported that the August unemployment rate was 7.3 percent, down slightly from July. Overall the United States economy added 169,000 jobs last month.

This is welcome news when compared to fears of over 10 percent unemployment only three years ago. That is until one begins to dig behind some of the numbers and looks at such items as monthly revisions, labor force participation and the quality of new jobs.

There was some disappointment with the overall jobs report. While the 169,000 new hires weren’t far off a Bloomberg survey of economists, there is concern over the downward revision of 74,000 jobs for June and July. It seems that one month’s report “giveth” and another month’s report “taketh away”. Jared Bernstein, a senior fellow at the Center for Budget and Policy Priorities, told the Washington Post, “I have a hard time seeing the labor market improving at the pace we need”.

The size of the workforce actually fell in August by approximately 300,000 and the labor force participation rate – people actually working – fell to 63.2 percent. This is the lowest it has been since 1978. To put it another way over one-third of Americans are not engaged in gainful employment. Once a person without a job stops looking for one, the government stops counting them as unemployed. This includes retirees, young people who decide to go back to school and others who have just given up looking for work.

In a Businessweek article Wells Fargo economist John Silvia observed “declining participation in the labor force is bad for financing entitlements”. As the actual number of people in the workforce declines, additional strain will be placed on funding Social Security, Medicare and other government programs.

The quality of jobs being generated in the current economy tends to be low-skill, part time or both. The National Employment Law Project, which represents low-wage workers, noted that much of the August job growth was in retail and food services, which typically offer low-paying and temporary jobs. Year-to-date more than 645,000, or 45 percent, of the 1.44 million jobs added to the workforce have come primarily from three industries; retail – department stores; hospitality – hotel and restaurants; and temporary services.

Richard J. Kinney
Dick Kinney has over 30 years corporate management experience. He has served as an advisor to business and state government on management and public policy issues.


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