August jobs report – Can’t hide the decline

By Steve Eggleston

Yesterday, the Bureau of Labor Statistics released the August jobs report, and the news was not good. The seasonally-adjusted 144,000 non-farm jobs added, with 134,000 in the private sector, broke the 8-month streak of at least 200,000 jobs added per month, and was unexpectedly worse than the expert consensus of 220,000-230,000 jobs added. The prior two months’ worth of jobs gains were revised down by a net 28,000.

Meanwhile, even though the unemployment rate fell by 0.1 percentage points to 6.1%, that was due almost exclusively to more people departing the workforce. Only 16,000 more people were employed on a seasonally-adjusted basis in August, while the labor force declined by 64,000. That drove the seasonally-adjusted labor force participation rate back down to its multi-generational low of 62.8%, a level that, prior to October 2013 (and again in December 2013, April 2014, May 2014 and June 2014), was last seen in March 1978. The seasonally-adjusted employment-population ratio remained stuck at 59.0% for the third consecutive month, a level not seen between February 1984 and August 2009.

As usual, the deeper one digs into the numbers, the worse the news gets. Once again, there is a disconnect between the estabilshment survey, from which the jobs numbers come and the household survey, from which the unemployment numbers come. On a seasonally-adjusted basis, while there were 354,000 non-farm jobs added since June per the establishment survey, there were 168,000 fewer people working in non-farm jobs in August than in June per the household survey. That continues a multi-year trend – while there were 2,512,000 non-farm jobs added on a not-seasonally-adjusted basis since August 2013, there were only 2,064,000 more people employed in non-farm jobs on a not-seasonally-adjusted.

Staying with the non-seasonally-adjusted numbers, the 63.0% labor-force participation rate is the weakest August since August 1977’s 62.7%. The 59.1% employment-population ratio is, other than August 1982’s 58.7%, the weakest August between August 1977’s 59.0% and August 2010’s 58.8%. In fact, a larger percentage of the population was employed in August 1969 (59.2%) than was employed last month.

One more item – had each 5-year age group participated in the labor force at the same percentage as that group did in August 2008 (with the youth participating even more to cover the fact that the employed portion of the 60-64, 65-69 and 75+ year old population is larger than the entire population of those age groups back in 2008), the unemployment rate would have been 8.8%, not 6.1%.

Revisions/extensions – Related to this, the Los Angeles Times has a story on the booming street vendor phenomenon that has grown well beyond its traditional recent immigrant base to include, among others, laid-off professionals. While the Times has a short memory and didn’t make the connection, those with a sense of history might note the similarities to the last “Great” economic downturn, the Great Depression.