The Labor Department reported that U.S. employers added 169,000 jobs in August and the unemployment rate fell from 7.4 percent to 7.3 percent, however, the underlying details for both data points were far more negative than the data itself.
Once again, job growth was concentrated in low paying retail trade and food service sectors and there were large downward revisions to prior data. As for the falling jobless rate, it was due entirely to workers leaving the labor force and no longer being counted as “unemployed” as the labor force participation rate fell to 63.2 percent, its lowest level since 1978.
The August payroll gains were slightly less than the consensus estimate of 180,000, but the more important payrolls data came via downward revisions to prior data. The June job creation total that was originally reported at 195,000 was lowered to 188,000 last month and ended up at 172,000 in today’s report while payroll growth in July was revised from 162,000 to 104,000, all of which makes the recent trend decidedly down.
The declining jobless rate was driven by an exodus of 312,000 people from the labor force as 115,000 fewer people had jobs and 198,000 more people were counted as “unemployed” All told, some 516,000 more people were counted as “not in the labor force” as the labor force participation reached a new recovery low.