Economy | timiacono.com - Part 30

The Amazing Labor Force Participation Rate

Here’s a long-term view of the labor force participation rate after today’s report from the Labor Department where it dropped to 62.3 percent, the lowest level in 35 years.

Labor Force Participation Rate

Surely there are demographic trends involved here, however, retiring baby boomers is not one of them as the ranks of employed persons 55 years and over has consistently risen as the participation rate has fallen in recent years.

In fact, per this Labor Department data, the number of employed people 55 years and over has risen by 496,000 over the last five months, accounting for virtually all of the 500,000 increase in workers 20 years and older during that time.

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Payrolls Up 169K, Jobless Rate Down to 7.3%

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.

August Jobs

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.

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The Jobless Rate Here is 3.5 Percent!?

The chart below appeared in the local paper here not long ago and data at the Montana state government website confirms that the descending yellow line is not in error – the jobless rate in this county of 50,000+ people was a freakishly low 3.5 percent in July.

These are North Dakota-like unemployment numbers, though the shale boom spillover from that area is no doubt a factor in Montana’s economic data.

According to this Labor Department data, the unemployment rate in our neighbor to the East is just 3.0 percent, well below the rate in Montana that, according to Washington is 5.3 percent and according to Montana is 4.8 percent.

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Q2 GDP Revised Higher to 2.5% Rate

This will further complicate the Fed’s deliberations on “tapering” next month…

The Commerce Department reported that, during the second quarter, the U.S. economy expanded much faster than originally estimated as new data caused the growth rate to be revised up from 1.7 percent to 2.5 percent, well above expectations for a 2.2 percent rate.

The upward revision was due primarily to higher net exports after the trade deficit shrank from $45 billion in May to $34 billion in June, its lowest level since late-2009.

Domestic spending also was revised higher, from an annualized gain of 1.3 percent to 1.9 percent, and both nonresidential investment and inventories improved.

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