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New job growth doesn’t indicate a strong labor market

September 5, 2014 at 8:32 PM EDT
Though economists predicted a month of strong hiring, only 142,000 positions were added to the market in August. Paul Solman explains why the growth disappointed many.
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JUDY WOODRUFF: Economists had predicted a solid month of hiring in August. But the latest jobs report came in below expectations and proved a bit confounding again. There were just 142,000 jobs added last month, and, yes, the unemployment rate dipped to 6.1 percent, but it wasn’t because of great strength in the labor market.

Our economics correspondent, Paul Solman, has the story, part of his ongoing reporting Making Sense of financial news.

PAUL SOLMAN: After months of upbeat jobs reports, is the recovery losing steam?  That’s the question posed by the latest jobs numbers, which were less than encouraging.

Georgetown University’s Harry Holzer is a former Labor Department chief economist.

HARRY HOLZER, Georgetown University: The payroll numbers were disappointing. They’re the lowest we have seen in eight months, first time in over six months that they have dropped below 200,000. On the other hand, I never put too much stock in any one month’s numbers. It could be a blip. It could be a correction for too high numbers the last few months because of seasonal adjustment quirks. So, a little disappointing, but presumably we’re still on track.

PAUL SOLMAN: That’s because of buoyant sectors like business services and health care, which between them added over 80,000 jobs. And the number of long-term unemployed, those jobless for 27 weeks or more, continued to decline.

And for those who are working, average hourly earnings finally rose above the rate of inflation. But let’s not get too excited, says Holzer.

HARRY HOLZER: Wages have been flat for at least seven years, and in fact haven’t grown much at all since the year 2000. And inequality is growing dramatically.

I think there are people in that very low-wage labor market that are getting upset and that are getting tired of these low wages.

PAUL SOLMAN: Upset, indeed, like the thousands of fast food workers, making about $9 an hour on average, clamoring Thursday nationwide for higher pay. Hundreds were arrested. And what about the profusion of part-time jobs?

ONIEKA O’KIEFFE: I would like a full-time job.

PAUL SOLMAN: On Monday, we profiled New York part-timer Onieka O’Kieffe, who earns $8 an hour stocking shelves at American Eagle in Times Square by night, by day, another stockroom gig at Crocs, more than 50 hours a week, and yet no full-time job.

ONIEKA O’KIEFFE:  They’re very few and far between, like, at least in retail, and maybe anywhere else really, because like there’s — apparently, there’s a trend going on with, like, part-time work, so it — it’d be really hard to find something.

PAUL SOLMAN: Thus, she and some seven million other Americans worked multiple jobs last month, suggesting that the 142,000 headline number this morning were total jobs added to the economy, not total workers, since many of the jobs were presumably part-time, with some workers doing more than one of them.

Two final notes on the downside of today’s numbers, the jobs for June were revised downward by a substantial 30,000, and while the country grew at its usual pace, the work force didn’t.

What struck me, looking at the numbers, were 200,000 more people in the American population, but no more people in the work force.

HARRY HOLZER: We were starting to hope that a lot of these people that had dropped out of the labor force maybe were coming back in, and this month’s numbers suggest maybe not.

PAUL SOLMAN: In fact, the official unemployment rate fell to 6.1 percent, but partly because of people dropping out, driving the proportion of Americans working or looking for work last month to the lowest level since the late 1970s.

But isn’t that because of all the retiring baby boomers?

HARRY HOLZER: We have seen several million people drop out of the labor force, of the potential labor force. Only about half of them seem to be doing it for retirement reasons. The other half, close to four million people, are well below retirement age, and we still don’t know what their future plans are and why so many of them are leaving.

PAUL SOLMAN: Because so many new jobs are part-time?  Low-paid?  Just hard to find?  Could be any and all of the above.

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