Only 96,000 jobs were created last month, which barely serves to keep up with population growth and is far below what is needed to get us back to full employment. The actual unemployment rate dropped to 8.1%, but that is only because so many people dropped out of the labor force. Labor force participation is the lowest that it has been in 31 years.
The details of the report were worse than the headline. Revisions reduced employment in June and July by 41,000 in total. The unemployment rate fell for the wrong reasons: 368,000 people left the labour force and the participation rate, the share of the working-age population either working or looking for work, slumped to 63.5%, a three-decade low, from 63.7%. The household survey, which often diverges from the larger survey of employers, found that the number of employed people actually fell in August by 119,000 from July.
The breakdown of the data revealed a similar pattern to what has prevailed all year: private payrolls grew 103,000 but the total was held back by a 7,000 drop in government. Manufacturing did fall by 15,000, but that was largely because of a large increase in July as auto makers skipped the usual seasonal layoffs for retooling. There were gains in education, leisure and hospitality.
While the news surprised Wall Street, which had expected 143,000 jobs, perhaps it shouldn’t have. There has been little evidence so far of any shift in the economy’s underlying momentum in the third quarter. Auto sales have improved but construction has been weak and manufacturing seems to have lost momentum. The economy appears to be growing at around a 2% annual rate, right around its average pace since the recession ended in mid-2009.
Walter Russell Mead adds further commentary. I expected that this terrible jobs report would cause Paul Krugman and Brad DeLong to gnash their teeth and call for more Keynesian stimulus. But instead, we see Krugman trying to downplay the bad jobs report, and DeLong writes as though the jobs report is unvarnished good news.
One can guess the reasons why. Both Krugman and DeLong believe that it is more important to re-elect President Obama than it is to tell the truth about the just how lousy the jobs report is. So they are being hacks and pulling their punches. But the rest of us realize that the jobs report is about the most eloquent rebuttal to the Obama acceptance speech at the Democratic National Convention. Krugman and DeLong may think that 96,000 jobs and a perilously low labor participation rate is the best that we can do, but we have every right and every reason to expect better.
After all, if Barack Obama could scoff at the creation of 300,000 jobs in a single month, we can most certainly scoff at this.