Unemployment Rate Dips to 7.3% in August

Unemployment Rate Dips to 7.3% in August

09/06/2013 BY: MARK LIEBERMAN, FIVE STAR INSTITUTE ECONOMIST

The nation’s economy added 169,000 jobs in August as the unemployment rate fell to 7.3 percent, the lowest level since December 2008, the Bureau of Labor Statistics ( BLS) reported Friday. Economists had forecast payrolls would grow by 180,000 and that the unemployment rate would remain at July’s 7.4 percent.

Payroll growth for July, originally reported at 162,000 was revised down 58,000 to 104,000. June payroll growth was revised to 172,000 from 188,000.

Average weekly hours rose to 34.5, matching forecasts, and average hourly earnings improved five cents.

The dip in the unemployment rate came as the labor force tumbled 312,000.

The revisions meant July’s increase in jobs was actually the weakest since June 2012, when the economy added 87,000 jobs.

The three-month average of new payroll slots was 148,000, down from 172,000 in the previous three months and weakest three-month average gain since June-July-August a year ago, when payrolls increased by an average of 135,000 per month.

Most of the revisions for both June and July were due to updated counts of state and local government jobs. The total number of state government jobs was revised down 9,000 for June and 14,000 for July, while the tally of local government jobs went down 7,000 in June and 17,000 in July.

The number of state government jobs fell 3,000 in August, while local government jobs increased 20,000—all of them education positions.

The household survey, which captures the number of persons employed and unemployed (yielding the unemployment rate), painted a picture of a discouraged working age population, even with the dip in the jobless rate.

The labor force participation rate—the sum of employed and unemployed as a percentage of the over-16 population—dropped to 63.2 percent, the lowest since June 1978.

The broader employment-population ratio, which captures measures employment as a percentage of the same population base (irrespective of availability for work), dropped to 58.6 percent; it had been 62.7 percent when the Great Recession began in December 2007. The measures differ because “unemployment” is a defined term including only those who meet three tests: out-of-work, available-for-work, and looking-for-work. The inverse of the employment-population ratio, 41.4 percent, is the broadest measure of unemployment.

The addition of 169,000 payroll jobs in August—actually a recovery, since the number of payroll jobs is down 1.9 million since the beginning of the Recession—was tempered by an increase of 29,000 multiple jobholders, which means some of the new payroll positions went to individuals who already had jobs.

The increase of payrolls in August from July was made to look better on an industry-by-industry basis because of the July revision.

Manufacturing jobs increased 14,000 in August after falling 16,000 in July. The original report had manufacturing jobs up 6,000 in July.

There were some absolute positives. The education and health services sector added 43,000 jobs in August after adding 26,000 in July compared with the original report of 13,000 new jobs in July.

BLS reported 44,000 new retail jobs in August on top of 48,800 in July, essentially unchanged from the initial report of an increase of 47,000 retail jobs in July.

Jobs in the leisure and hospitality sector grew by 27,000 in August after adding 13,000 in July; the initial July report showed the sector added 23,000 jobs.

Of the 152,000 private sector jobs added in August, retail and leisure and hospitality, the two lowest paying industry sectors, accounted for 71,000, or 46.7 percent. Average weekly earnings in the leisure and hospitality sector, according to BLS, were $352.04 in August and in the retail sector $523.44. The average weekly earnings in the third lowest paying sector—“other services”—were $678.29. The number of jobs in that sector was flat in August.

The highest paying sector, utilities ($1,484.73 per week), shed 800 jobs in August, while the next highest paying sector, mining and logging ($1,305.04 per week), added 4,000 jobs.

The number of information sector jobs—which includes publishing industries, motion pictures, broadcasting and telecommunications—fell 18,000 in August after growing 13,000 in July, revised from the original growth of 9,000.

The number of construction jobs in August was flat to July. The number of construction jobs fell 3,000 in July, revised from the original report of a drop of 6,000.

The number of manufacturing jobs rose 14,000 in August, almost reversing a loss of 16,000 in July, revised from a gain of 6,000. Most of the change came in auto-related jobs, which increased in 18,800 in August after falling a revised 10,400 in July with layoffs due to retooling of plants for the new model year.

The number of professional and business service jobs grew 23,000 in August including 13,100 temp jobs. The Beige Book report earlier this week noted that while registrations at temporary help agencies had increased, the number of placements had fallen. Temp jobs are thought to be an indicator of broader employment increases but could also signal waning confidence among employers reluctant to make permanent staff additions in run-up to the January 1, when the Affordable Care Act takes effect.

Despite the drop in the unemployment rate (which moved it closer to the 6.5 percent trigger the Federal Reserve has set to begin tapering its stimulus program), the details behind the drop could delay any move by the Federal Open Market Committee.

In addition to the drop in the participation rate, the number of persons not in the labor force rose 516,000, the largest month-over-month increase since February.

The report also showed a drop in the number of re-entrants to the labor force—individuals previously not looking for work. The number of re-entrants fell 129,000 in August, the seventh decline in the last eight months.

The average duration of unemployment rose to 37.0 weeks in August, the longest since March and the fifth increase in the last seven months—even as sequestration cuts have forced state to reduce the number of weeks they will pro

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