Policy Feature Issue: August Jobs Report
On Friday, the Bureau of Labor Statistics (BLS) released its August monthly jobs report. Though nonfarm payroll employment increased by 169,000 in August, the unemployment rate decreased only slightly to 7.3%. The August jobs report suggests that our country’s anemic economic recovery shows no signs of improving. Although overall nonfarm employment grew during the month of August, the civilian labor force shrunk, and labor force participation decreased for the second straight month, to the lowest point since 1978.
Facts You Need to Know:
- The unemployment rate remained essentially unchanged from July, decreasing slightly from 7.4 percent to 7.3 percent. The number of unemployed persons decreased slightly from 11.51 million in July to 11.31 million in June.
- Long-term Unemployment (those unemployed for more than 27 weeks) increased slightly from 4.25 million to approximately 4.29 million Americans in the month of August.
- The Labor Force Participation Rate, which identifies the number of people who are active participants in the labor force (relative to the total population), decreased from 63.4% in July to 63.2% in August. The Labor Force Participation Rate is currently at its lowest level since August, 1978. The Employment-Population Ratio, a metric which establishes the raw employment rate, decreased slightly from 58.7% in July to 58.6% in August.
- Average hourly earnings for all employees increased by 5 cents to $24.05. In the last year, average hourly earnings have increased by 52 cents (2.2 percent).
Why Does a “Pro-Growth” Agenda Matter?
- Labor force participation has reached its lowest level in 35 years. A historically low labor force participation rate is a significant barrier to economic growth. In order to facilitate strong long-term growth, labor force participation must be higher in order to encourage business expansion. Economic growth is necessary to broaden the tax base and increase revenue organically.
- Especially concerning is the fact that the labor force continues to shrink. In August, 115,000 less Americans reported that they were employed, while the number of Americans not in the labor force increased by 516,000. This means that less people have jobs, while an increasing number of people simply give up looking for work. As a result, the unemployment rate decline that occurred in August is highly misleading.
- In addition, an increase in the number of long-term unemployed Americans is a worrying sign considering the large number of Americans who dropped out of the workforce in August. A large group of institutionally unemployed Americans is a serious barrier to a strong recovery, and the potential for this population to become part of a perpetually unemployed class of Americans is a significant risk.
- The Bureau also posted revisions to the June and July job creation projections. With the revisions, employment gains in June and July combined were 74,000 less than previously reported. The revisions to the June and July jobs reports show that job creators are struggling to create enough jobs to match demand based on population growth.
 BLS, Historical Tables, Labor Force Participation Rate