The August employment report was expectedly dismal, but equivocal in that it gave both parties data points to selectively highlight.
First, the BLS Establishment Survey reported that 96,000 jobs were added … that’s good since it’s a positive number.
But, there was a decline in “goods producing jobs” – i.e. manufacturing … and the 96,000 is below the the 125,000 level that is commonly held as the number required to keep pace with population growth and keep the unemployment rate constant.
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Nonetheless, the reported unemployment rate went down to 8.1%.
How can that be?
Good question since the Employment reported from the Household Survey – the basis of the 8.1% calculation – declined by 119,000.
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Now, stop and think about that for a second.
The Establishment Survey said 96,000 jobs were added.
The Household Survey said employment dropped by 119,000.
Yet the unemployment rate went down – from 8.3% to 8.1%.
Hmmm. How can that be?
Well, 368,000 people dropped out of the labor force – stopped looking for work – either retired, became disabled, or simply kicked back on unemployment benefits.
If they hadn’t quit looking for work, they would have been counted as unemployed … and the reported unemployment rate would have been 8.33% – up more than .1% from 8.25% last month
The puts a whole new paint job on things, right?
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The number of folks dropping out of the labor market is a big deal … since the magnitude is big and the trend is bad – especially this year.
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The KEY METRIC
To consolidate all of the above “stuff” into a single metric, I like to look at the employment-to-population ratio … what % of adults who are employed.
The employment-to-population ratio is now at 58.3% … meaning that 41.7% of adults AREN’T employed … that’s a big number !
Note that the employment-to-population ratio hovered around 63% during most of the Bush years … then collapsed during the financial crisis … dropping a 5 points … and then hovering around the lower level.
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While the employment-to-population ratio looks like it’s “hovering”, look at the past couple of months … it has dropped by .5%.
That may sound like rounding error, but multiply it times the working age population … and you get over 1.2 million fewer people employed.
Ouch. That’s not rounding error!
Bottom line: we’re stalled !
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The Homa Files 
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