Three Takeaways from the July Unemployment Data
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Today the Bureau of Labor Statistics released its monthly jobs report for July. Suffice it to say, it does not show much of an improvement over the June data. In fact, the unemployment rate increased from 8.2% to 8.3%. While it is only a tenth of a percent increase, it means that all of the marginal improvements made this year have now been completely wiped out. Looking deeper into the data, we see more troubling data:
200,000 fewer people are working:
The loss of 200,000 employed persons is probably the worst news out of the jobs report. While some of that loss could be attributed to end of fiscal year retirements, looking at historical data, the June to July data does not show any recurring trend. In years of economic weakness, the June to July number falls and in good economic years, the number rises. Thus economic conditions as a whole are the driving force in this numbers, rather than retirements. Had retirements been the driving force, the data would have shown a consistent decline in the June to July figures.
That being said, the fact of the matter remains that there are 200,000 fewer people working in July than there were in June. No matter the reason in which those jobs were lost, be it layoffs or retirements, the problem is that those jobs were not filled.
Workforce Participation Rate Drops to 63.8%:
The workforce participation rate measures the number of people who are either looking for, or have a job. While measured as both a rate and in terms of individuals, the participation rate has fallen over the past few years to rates not seen since the early 1980s. While a small portion of this was expected due to the first wave of baby boomer retirements, the extent and sharpness of the decline is directly attributable to the recent economic turmoil. The drop in the workforce participation rate from June to July represents 150,000 people no longer employed or seeking work. Given the corresponding increases in the U-4 and U-6 unemployment figures, most, though not all, dropped out of the workforce due to economic reasons.
U-4 and U-6 also increased.
In simple terms, the U-4 and U-6 unemployment rates are different classifications of unemployment, with progressively wider definitions of what it means to be ‘unemployed.’ When you’ve heard on the news that the current unemployment rate isn’t the ‘real’ unemployment rate, these rates are usually the measurements they are referring to. While it makes sense that these rates would increase along with the official unemployment rate, the fact that they do, shows that the problem of large numbers discouraged workers is continuing, not getting any better.
For a more detailed discussion of the alternative means of measuring unemployment, click here
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