The Bureau of Labor Statistics (BLS) released their August Employment Report last week and it continued to show a weak labor market (see Figure below).
Let us begin with potential positives:
1. The unemployment rate (UNRATE) declined to 7.3 percent, which is the lowest since December 2008.
2. There were 169,000 jobs added in August and the average over the last 12 months is 184,000.
3. Average hourly earnings increased by 2.2 percent to $24.05 over the last year.
Unfortunately, as discussed in a Speaking Freely post last week, the fall in the unemployment rate does not tell the whole labor market story.
To consider the full labor market story, let us look at other measures:
1. The labor-force participation rate (CIVPART) declined to 63.2 percent and remains well below the 66 percent it was before and during most of the Great Recession-the last time this measure was so low was in August 1978. While there are now 11.3 million unemployed individuals, 312,000 individuals dropped out of the labor force last month because of bleak job prospects.
2. The total unemployment rate, known in the jobs report as the “U-6” rate, is at 13.7 percent-or a total of 21.6 million unemployed, underemployed, and discouraged Americans. These individuals are certainly no better off despite their exclusion from the unemployment rate.
3. The employment-to-population ratio (EMRATIO) remains at 58.6 percent, which is where it has been during most of the so-called economic recovery. If you correct for the mass labor market exodus of baby boomers retiring, the employment-to-population ratio for those 25-54 years old was unchanged last month at 75.9 percent.
Bottom line: The unemployment rate alone does not tell the whole story and in fact masks the truly weak labor market facing millions of Americans. Although there are unemployed individuals in Texas, the unemployment rate of 6.5 percent remains lower than the national average, as it has for 79 consecutive months. In fact, the state’s unemployment rate would be much lower had the population rate not increased substantially over the last few years. Clearly, low taxes and spending and a predictable, low level of regulation that are the foundations of the “Texas Model” would benefit other states and the nation as well.
Source: Federal Reserve Economic Data