Unemployment Slight Decrease Can’t Compensate for People Leaving Labor Force (HDLN)

By Sophia Williams     October 30, 2013, 11:10PM

New York, NY — The national unemployment rate for August proved weak as the amount of people that fell out of the labor force was greater than jobs added. (DECK)

On September 6, 2013, the  U.S. Bureau of Labor Statistics (BLS) released the August unemployment report.  The unemployment rate dropped to 7.3% with the addition of 169,000 jobs mostly in retail and health industries. (LEDE)

The addition of jobs (figure) was very close to economists expectations, as they predicted new jobs growth to be between 175,000 – 180,000. (EXPECTATIONS)

In addition,  the BLS unemployment report showed revised numbers for nonfarm employment for the month of June and July.  June decreased from 188,000 to 172,000 and July decreased from 162,000 to 104,000.  The revisions led to a reported total of 74,000 less jobs added for both months.  With this current trend, the jobs growth is hardly keeping up with the rising unemployment. (REVISIONS)

The reports shows that the unemployment rate went down for reasons unexpected.  With more discouraged workers unable to obtain a job position, they left the labor force which led to a decline in the unemployment rate from 7.4% to 7.3%.  This has been the lowest jobless rate since December 2008.  According to the BLS database, labor participation made a slight drop from 63.4% in July to 63.2% in August.  Though the labor participation rate has been on a steady decline for years, this is the lowest it has been since 1978.   (Analysis)

“If people remained in the labor force and were currently unemployed and looking for work, then unemployment rate would be 9%,” said Edward Malca, economics Professor at Baruch College. (Quote)

The Federal Reserve is keeping a watchful eye on the unemployment report as it decides whether to slow down its monthly buying of $85 billion in Treasury and mortgages, also known as the stimulus program.  The Fed’s objective in buying Treasury bonds and mortgage securities is to help keep interest rates low and stimulate economic growth by having consumers spend more.  Ben Bernanke, the Federal Reserve Chairman, projected that the Fed will soon decide, at their next policy meeting slated for Sept. 17-18, 2013,  whether to begin slowing down the buying of bonds and mortgage securities.  The decision to slow down their purchases will be based on the overall health (growth/decline) of the economy, mainly the job market.  It does seems likely that, at the policy meeting, the Fed will cut down on their purchases  as many officials of the Fed would like to see the cut take place.  (Fed’s response)

“The Fed through its monetary policy (low interest rates and borrowing costs) is doing what they can to make it easy for people to borrow and spend, so that will create jobs,” said Clinton Winston, senior fellow of economic studies at Brookings Institution.   (Quote)

Majority of hiring took place in retail and the health care industries.  According to BLS, the retail sector “added 44,000 jobs in August and has added 393,000 jobs over the past 12 months.”  Furthermore, clothing stores added 14,000 jobs,  merchandise stores added 9,000, bars and restaurants added 12,000, and electronic and appliances added 4,000.  (Numbers)

Health care jobs increased to 33,000, as 27,000 of those jobs came in the ambulatory care sector.  Also, the filling up of positions in the business and professional  sectors totaled to 23,000 and in the last 12 months 614,000 jobs have been added to business and professional services.  Finally, manufacturing jobs have really been on the rise, as that sector has added 14,000 new jobs, and on a brighter note, the auto industry employment grew to 19,000 jobs, after a decline of 10,000 in July.  The growth in auto manufacturing positions was due to rehiring of workers who were previously laid off in July when car factories made changes to new models. (Numbers)

Manufacturers added 14,000, the first gain after five months of declines. Construction jobs remain unchanged in August. Auto manufacturers boosted hiring in August. Some of the jobs included workers who were rehired last month after being temporarily laid off in July, when factories switched to new models.  Overall, in the last 12 months, the auto industry added 34,000 positions. (Numbers)

As compared to August’s 2013 unemployment rate, August 2012 unemployment data appeared more gloomy as unemployment rate inched up to a whopping 8.1% and only a meager 91,000 jobs were added to the economy.   The labor force participation for August 2012 also was slightly poor in comparison to the current report, as August 2012 showed 65.3% of people participated in the work force, whether employed or unemployed. (Context-Comparisons)

Employers have added an average of just 148,000 jobs in the past three months, well below the 12-month average of 184,000.  Prof. Malca also noted that, “The economy is growing at a relatively slow rate of 1 1/2% – 2% during current recovery.”  Overall, within the last three months, 148,000 jobs were added to the economy. However, that number is a poor indicator of where the economy is now heading, compared to the previous better growth of a 12 month average of 184,000 jobs added.  (Overall Assessment)

National Unemployment Rates, 2008-2013 (Since 2008 Financial Crisis) 

 Source: Bureau of Labor Statistics