The awful, awful August jobs report
By James Pethokoukis @ AEI (September 7, 2012)
This was not the employment report either American workers or the Obama campaign were hoping for. A huge miss. It shows the U.S. labor market remains in a deep depression, generating few jobs and little if no income growth. As IHS Global Insight puts it:
‘All cylinders are not yet firing … manufacturing has at least temporarily run out of steam, and overall growth in output and employment is likely to remain at only a modest pace. … We expect second-half 2012 GDP growth to average 1.5%, slightly slower than the first half. Slower growth in exports and business capital spending will keep growth subdued.’
And here is Citigroup’s take:
‘The unemployment rate dropped to 8.1% from 8.3%, but in this case with declines in both the labor force (-368,000) and the household-survey measure of employment (-119,000). With labor force participation falling back to a new cycle low of 63.5%, the drop in the unemployment rate should not be reported as good news.‘
Now the depressing details of the jobs report:
– Nonfarm payrolls increased by only 96,000 in August, the Labor Department said, versus expectations of 125,000 jobs or more. The manufacturing sector, much touted by the president in his convention speech, lost 15,000 jobs.
– Since the start of the year, job growth has averaged 139,000 per month vs. an average monthly gain of 153,000 in 2011.
– As the chart at the top shows, the unemployment rate remains far above the rate predicted by Team Obama if Congress passed the stimulus. (This is the Romer-Bernstein chart.)
– While the unemployment rate dropped to 8.1% from 8.3% in July, it was due to a big drop in the labor force participation rate (the share of Americans with a job or looking for one). If fewer Americans hadn’t given up looking for work, the unemployment rate would have risen.
– Reuters notes that the participation rate is now at its lowest level since September 1981.
– If the labor force participation rate was the same as when Obama took office in January 2009, the unemployment rate would be 11.2%.
– If the participation rate had just stayed the same as last month, the unemployment rate would be 8.4%.
– The Labor Department also said that 41,000 fewer jobs were created in June and July than previously reported. The change in total nonfarm payroll employment for June was revised from 64,000 to 45,000, and the change for July was revised from 163,000 to 141,000.