Unemployment Dropped in August for All the Wrong Reasons…again

By Ray Pinard | September 24, 2013

Our friends at the Josiah Barlett Center for Public Policy posted this interest article on their web site:

The August jobs report seemed rosy on the surface; unemployment dropped from 7.4% to 7.3%, and 169,000 jobs were added. Looking closer at the data we see that this is anything but good news.

While unemployment did drop by just shy of 200,000, the size of the labor force also contracted by 300,000 resulting in more than 500,000 people no longer seeking work. As detailed in earlier posts on the subject, all of the attempts to chalk up this decline to baby boomers retiring, or some other, non-economic phenomena can easily disproved by the data. In fact, most baby boomers are delaying retirement, resulting in an above average labor force participation ratio for that age band. So rather than dragging down the national ratio, they are helping to increase it.

The Labor Force Participation Rate, the measure of how many non-institutionalized, non-enlisted Americans are in the workforce, hit a record low of 63.2%. The last time the rate was this low was August of 1978. At the time, the rate was surging to new highs as many women entered the workforce for the first time. In 2013 on the other hand, the rate has been hovering at near, or hitting in the case of August, record lows. Some decent improvement had been made in the first half of the year; however, all of the gains made for the year have been given up and then some.

Turning to the alternative measures of unemployment, the U-4 rate decreased from 8.0% to 7.8%, U-5 from 8.8% to 8.7% and the U-6 from 14.0% to 13.7%

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