The Job Market Has a Case of the Blahs

The sluggish labor market recovery continued in August, with employers adding 96,000 to their payrolls. This rate of job gain is approximately fast enough to keep pace with the growth of the working-age population. If maintained over several months, however, it is too slow to put a dent in the nation’s unemployment rate. For the 30th consecutive month private payrolls grew, increasing 103,000. Since the turnaround in private payrolls began in March 2010, private employers have added a total of 4.63 million workers to their payrolls, for an average gain of 154,000 workers a month. In 24 of the 30 months since March 2010, however, government payrolls declined. Last month they fell another 7,000. The good news is that this is a slower rate of decline than we have seen during most of the recovery.

The headline number in the jobs report is the unemployment rate, which fell 0.2% to 8.1%. The encouraging trend in unemployment masks a discouraging trend in labor force participation. The participation rate fell 0.2% in August, reaching a new low for the current business cycle. Some workers who have exhausted their unemployment benefits or remained jobless for a more than half a year gave up their search for work and dropped out of the workforce. The number of workers unemployed longer than 6 months fell 152,000 in August and has fallen almost 1 million over the past 12 months. 

With respect to employment gains, the household survey offers a discouraging picture. The number of Americans reporting they hold a job fell 119,000 in August following a drop of 195,000 in July. Since January, the household survey shows that employment has risen just 464,000, or about 66,000 a month. If sustained over many months, this pace of employment gain is too slow to keep the unemployment rate from rising. The unemployment rate has edged down since January, but only because the fraction of working-age Americans in the job market has shrunk. The economy needs to see a sizeable jolt in economic growth this fall if the job market gains of 2010 and 2011 are to be duplicated.