June’s unemployment dip means more Americans leaving the workforce

Surfboard glasser glassing surfboard worker Photo by Getty Images

The U.S. added jobs and the unemployment dropped. So why does economy still feel sluggish? Photo by Getty Images

The numbers are in for June. The U.S. added 223,000 jobs and the unemployment rate dropped two tenths of a percent to rest at 5.3 percent.

At first blush, the numbers look great, as reflected by some early reaction on Twitter.

But once you dig a little deeper into the data, it’s clear that the two surveys—the “establishment survey” sent out to businesses asking how many jobs they created last month, and the “household survey” that asks people about their employment status—are at odds with each other. How so?

While businesses reported creating 223,000 jobs in June, we saw a decrease of 56,000 in those considered officially employed. Why, you may wonder, aren’t we seeing more people “employed”?

One hypothesis is that businesses created mostly part-time jobs, and/or that those who had already had part-time jobs took another. To be considered a full-time worker, one must work at least 35 hours a week. But the Bureau of Labor Statistics also counts part-time workers that have multiple jobs adding up to 35 hours as full-time employees.

This could also explain why the number of people working part time for economic reasons fell by almost 150,000.

Also of note, while the number of employed dropped by 56,000, the number of people that were classified as unemployed also decreased—by 375,000. OK, so how does that happen? You would assume that if the number of employed people grows, the number of unemployed would shrink.

Discouraged workers, people that are considered not in the labor force, but who would like a job, increased by some 20,000. (Remember, the Bureau of Labor Statistics only counts those people who have looked for a job in the past four weeks as unemployed.)

So let’s say of that 375,000, 56,000 became employed. Some 20,000 were then classified as discouraged workers, having not looked for a job in a month, but still very much wanting a job. How can we account for the remaining 300,000?

It’s possible that many simply left the workforce. Now this could mean that more and more baby boomers are retiring, but it could also mean that previously discouraged workers have now given up altogether.

As for our own Making Sen$e Solman Scale, which adds to the officially unemployed, discouraged workers, no matter how long it’s been since they looked for work, as well as the underemployed, it dropped by about .3 percent to land at 12.73 percent—the lowest it’s been since we began calculating it in 2011.


Alright, so in general that’s good, right? Well, the U.S. Bureau of Labor Statistics looked back at their data and the revision that followed suggests that job growth wasn’t as good as they originally reported. May’s numbers were revised down from 280,000 new jobs to only 254,000, and 34,000 fewer jobs were created in April than was previously thought.

Another important measure of the economy is wage growth. This past year, average hourly earnings have increased by a total of 2 percent, but in June, average hourly earnings did not move, remaining unchanged at $25.95.

The lack of wage growth is disappointing, and some on the left see it as a sign that the Fed shouldn’t raise interest rates any time soon.

So what does all of this information tell us? The U.S. economy is still improving, albeit slowly. As we say here often, don’t rely too much on one month’s numbers.