There is a weirdness in this month’s employment report. The numbers getting most of the attention, as they always do, are “jobs added” — 201,000 of them — and the official unemployment rate: steady at 3.9 percent. But these two numbers come from two completely different surveys — one of “establishments,” that is, employers; the other, from government workers who actually ask Americans, in 60,000 households every month, whether they’re working or not.
This month’s Establishment Survey reported the jobs-added number, which seems relatively healthy, if nothing to write home about. And the Household Survey reported that the unemployment rate remained unchanged. That would make sense. The working-age population grew by 200,000 or so, as it typically does, month to month. The new jobs presumably absorbed the newly-available workers. So far so good.
But wait a second. When you actually look closely at the Household Survey, you trip over some very puzzling data. According to the numbers, the labor force shrank by half a million people in August. And while the Establishment Survey reported 201,000 jobs added, the Household Survey shows 423,000 fewer Americans “employed.” How can that be?
We’ve been covering the monthly employment report here on Making Sen$e for more than a decade now. We’ve seen discrepancies between the two reports before. We’ve warned again and again not to make too much of any given month’s numbers. Economist Dean Baker calls them “erratic.” But hey, if the world is going to trumpet the headline numbers as rosy, the questions raised by the numbers on which they’re based deserve some acknowledgement.
So here’s a question for this month: Does the August Household Survey suggest that maybe the employment situation isn’t a story of lots of jobs being created so much as lots of workers quitting the workforce?
Surely, we’re in a tight labor market. We saw that first-hand while reporting on a major worker shortage in Wisconsin. But maybe that’s because the labor force isn’t growing, even though the population is. And why would that be? Maybe because lots of Baby Boomers are finally hanging it up. Some 300,000 of them are hitting Social Security’s “Full Retirement Age” of 66 every month. If many or most of them are leaving the workforce, that could explain much of the labor shortage.
A number that does get some coverage is the so-called “labor participation rate”: the proportion of workers to working-age Americans. That number dropped last month and has plateaued just above 60 percent. We haven’t seen a rate at that level since the 1970s, when fewer women were in the workforce. The Baby Boom retirement story would jibe with that number. But then, as Dean Baker points out to me, so does the well-documented drop in participation among young adults as well, which continued in August. Why is that? Your guess is as good as mine.
Two last numbers:
16 million. That’s how many Americans still say they want a full-time job but can’t find one. We’ve long calculated this unemployment rate — call it un- and underemployed, which we’ve dubbed “U-7” because it’s even more inclusive than the BLS number, U-6. (Those of you who want to know more can check out this BLS page.) U-7 for August stood at 9.57 percent, a slight rise over last month and of course much much higher than the official unemployment rate of 3.9 percent. But to put it into long-term perspective, in 2011 the U-7 was twice what it is today.
2.9 percent. That’s the year-to-year wage increase that is getting positive attention today. But, as we noted Friday, that’s no higher than the year-to-year rise in the Consumer Price index. Wages are increasing, but at the moment, inflation is eating up all the gains.