Our View

Jobless rate drops because fewer are looking

By From page A12 | September 13, 2013

The issue: Gloomy unemployment figures contrast with other positive economic reports

The summer, which otherwise produced a spate of positive economic news, ended on a depressing and worrisome note on the jobs front.

THE HEADLINE NUMBER was that the unemployment rate fell to 7.3 percent in August, the lowest level in nearly five years, down from 7.4 percent in July. But the fine print attributes the drop to fewer Americans actively looking for work and thus not being counted as unemployed.

And figures revised by the U.S. Department of Labor show that the summer hiring numbers were not as rosy as first seemed. The June and July hiring figures were scaled back a combined 74,000. July went from 162,000 to 104,000, the fewest in more than a year, and June from 188,000 to 172,000. And most of those jobs were in relatively low-wage industries.

The August figure was 169,000, but one has to wonder whether if even that lackluster figure will stand up on re-examination.

To put those figures in gloomy perspective, from 2012 right up until this summer’s employment flop, the economy had been adding an average of just over 180,000 jobs a month.

The labor-force participation rate — the percentage of Americans working or actively looking for work, which has been diminishing in any case — fell from 63.4 percent to 63.2 percent, the lowest in 35 years. Economists debate whether this represents a long-term structural change in the U.S. work force or whether it is the continuing aftermath of the recession.

BUT THE UNEMPLOYMENT figures contrasted dramatically with other positive economic reports. The Institute for Supply Management trade group reported, for example, that manufacturers last month expanded at the fastest pace in more than two years and service firms grew at the fastest pace in more than eight.

What Wall Street wanted to know was what the new jobless figures meant for Federal Reserve plans to slow and eventually stop its quantitative easing, under which it currently buys $85 billion a month in T-bills and mortgage bonds to keep interest rates low.

The Fed had been expected to reduce its bond-buying by $20 billion a month starting this fall, but observers say that could be scaled back to $10 billion a month and maybe delayed altogether depending on what happens in Syria and whether the more rabid House Republicans succeed in bringing government to a halt either by refusing to raise the debt ceiling or refusing to fund government agencies if their appropriations contain money for the Affordable Care Act, or “Obamacare.”

MUCH MORE THAN just the jobless figures depend on what happens this fall.

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