The nationÃ¢â‚¬â„¢s unemployment rate fell to 8.1 percent in August Ã¢â‚¬" the lowest level since April - but the economy added just 96,000 jobs, the ""Bureau of Labor Statistics"":http://www.bls.gov/ (BLS) reported Friday.[IMAGE]
According to BLS, 581,000 people left the labor force in August, leading to the drop in the unemployment rate, which nonetheless remained above the election-critical 8.0 percent. At the same time, JulyÃ¢â‚¬â„¢s job gains Ã¢â‚¬" originally reported at 163,000 Ã¢â‚¬" were reduced to 141,000 while JuneÃ¢â‚¬â„¢s job numbers dropped to 45,000 from 87,000.
Within the Ã¢â‚¬Å“household surveyÃ¢â‚¬Â the labor force participation rate, which tracks the labor force as a percentage of all those over 16, and thus is a measure of confidence in the ability to find work fell to 63.5 percent, the lowest level since September 1981
Economists expected payrolls to grow by 125,000 and the unemployment rate to remain at 8.3 percent.
Average weekly hours remained at 34.4, consistent with JulyÃ¢â‚¬â„¢s revised number but hourly earnings fell for all workers to $23.52 from $23.53, adding pressure on household incomes.
With todayÃ¢â‚¬â„¢s report, the unemployment rate remained above 8.0 percent for the 43rd consecutive month Ã¢â‚¬" the entire Obama Administration Ã¢â‚¬" though it has dropped from its cycle peak of 10.1 percent in October 2009.
The weak payroll gains were consistent with a slowdown in corporate profits. The Bureau of Economic Analysis reported last week corporate profits rose just 0.5 percent in the second quarter, a poor performance which was followed by slow increases in payrolls.
The impact of the payroll gains in the last two months was muted further by an increase in the number of individuals holding two or more jobs: up 152,000 in the last two months, 64 percent of the 237,000 increase in the number of jobs. As a result, the number of individuals classifying themselves as Ã¢â‚¬Å“employedÃ¢â‚¬Â in the household survey taken for this Employment Situation report fell a combined 314,000 in the last two months even with an increase in jobs.
The number of persons unemployed fell 250,000 in August to 12,544,000, the lowest level since April, but the number of people employed dropped as well, by 119,000 to 142,101,000, the second consecutive month-month drop and the fourth decline in the last six months.
While the increase in the unemployment rate was encouraging, it was more a function of arithmetic than any improvement in the economy with the decline in the total labor force which is the sum of person employed and unemployed. To be unemployed an individual over the age of 16 has to meet three tests: out-of-work, available-for-work and looking-for-work. The unemployment rate is the result of dividing those unemployed by the total labor force if unemployment goes down Ã¢â‚¬" as it did in August by 250,000 Ã¢â‚¬" and the labor force drops, the resulting unemployment rate will also fall.
An alternative measure showed more strain in the labor sector. The employment-population ratio which measures the number of people employed against the entire over-16 population, without qualifying definitions used to determine Ã¢â‚¬Å“unemploymentÃ¢â‚¬Â dropped to 58.3 percent. The inverse of the ratio Ã¢â‚¬" 41.7 percent Ã¢â‚¬" represents the share of the over-16 population without jobs. At the onset of the recession in December 2007, the employment-population ratio was 62.7 percent and when the recession officially ended in June 2009 it was 59.4 percent.
Another widely followed alternative measure of employment which includes discouraged workers and others Ã¢â‚¬Å“marginally attached to the labor forceÃ¢â‚¬Â fell to 14.7 percent in August from 15.0 percent in July, again a function of a declining labor force..
Despite the one encouraging sign in the report, other indicators were disappointing. The average duration of unemployment rose to 39.2 weeks in August from 38.3 in July, the third increase in the last four months.
The weak jobs picture touched all sectors of the economy. Manufacturing jobs, for example, fell 15,000 in August and JulyÃ¢â‚¬â„¢s gain of 25,000 was revised downward to 23,000. Within the manufacturing sector though, the auto industry shed 7,500 jobs in August.
While professional and business services added 28,000 jobs in August, the gain was far below the 47,000 jobs added in July and the number of new temporary jobs actually fell 4,900 in August after growing 6,900 in July. Temp jobs are often considered a gateway into permanent employment but also reflect a lack of confidence by employers who are reluctant to make a permanent addition to payrolls.
The sector showing the strongest job growth Ã¢â‚¬" 34,000 jobs -- was leisure and hospitality, the sector with the lowest average weekly earnings: $348.40 compared with an average of $809.09 for all private sector jobs.
Despite a quarter-quarter 2.7 percent decline in profits, the F.I.R.E. (finance, insurance and real estate) sector added 7,000 jobs August, more than reversing the 2,000 jobs cut in that sector in July. Within the financial sector, the number of real estate jobs fell 5,200 and the number of underwriting jobs dropped 1,100 in August.
While total construction employment nudged up a net 1,000 in August, residential construction jobs fell 1,100 and non-residential building construction jobs fell 2,400. Gains though were registered in residential specialty contractor positions with 8,200 new jobs in August.
The number of government jobs Ã¢â‚¬" which has long been a drag on the employment picture Ã¢â‚¬" fell another 7,000 in August after dropping 21,000 in July. State and local government payrolls fell a combined 10,000 while federal payrolls rose 3,000. According to the report, there were 2.8 million federal workers in August compared with 14.1 million local government jobs and just over 5 million state government jobs. Since the onset of the recession in December 2007, government payrolls are down a net 476,000 with most of the cuts at the state and local level.
The payroll report was also affected Ã¢â‚¬" positively -- by a strike of utility workers in New York City. Those workers returned to work in August, boosting utility jobs by almost 9,000, reversing a similarly sized decline in July. Jobs are only included in the payroll report if positions are paid during the week of the month including the 12th calendar day of the month. The 9,000 striking Con Edison workers were not on the payroll during the July survey period.