Like GDP, August jobs number reflect a weak economy.

1. Virtually all of the improvement in the unemployment rate since the recession ended has come from people dropping of of the labor force.  When the Recession ended in June of 2009, the unemployment rate was 9.5% and the labor participation rate was 65.7%.  Had the labor participation rate simply remained the same, unemployment in August would have been 9.1% instead of 4.9%.  In other words, all but 0.4 of a percentage point of the unemployment rate’s improvement from 9.5% to 4.9% since June of ’09 has come from people dropping out of the labor force.  Not surprisingly, 9.1% is much closer to what many economists consider the real unemployment rate (the U-6 rate) which stood at 9.7% in August.

2. But, hasn’t the increase in the total number of people working been a major contributor to the unemployment rate’s decline?  No.  While it is true that 11.6 million more people were employed in August than in June of ’09, the employable population increased by 18.2 million people.   In other words, the economy has created too few jobs even to keep up with population growth.  For example, in August, the number of people employed increased by 97,000 while the employable population increased by 234,000.  At a minimum the increase in the number of people employed should keep pace with the increase in the employable population.  Had the economy created fewer jobs, the unemployment rate would be worse but too few people have found work to reduce the unemployment rate materially absent the decline in labor participation.

3. How bad is labor participation?  Because the economy has failed to create enough jobs even to match the increase in the population, the labor participation rate has been at or below 63% for 29 consecutive months. It was last at 63% in April of 1978, over 38 years ago during the Jimmy Carter’s economic malaise.

4. But, isn’t it really demographics (Baby Boomers retiring) that explains the poor labor participation numbers rather than Obama’s poor economic performance.  No.  The majority of the decline has come from people dropping out because they can’t find good paying jobs or other aspects of a slow recovery (both negative reflections on the economy) or because they have retired (neither a positive nor a negative reflection on the economy). https://www.cbo.gov/publication/45011.  No matter how you look at it, people dropping out of the labor force is not a positive reflection on the economy.  In a growing economy, the labor participation rate goes up or holds steady while the unemployment rate goes down.

5. The economy is as weak as the GDP numbers demonstrate (1.2 GDP growth over the past four quarters).  The jobs numbers are a reflection of this continuing weakness.  The American people, who live with theses number, get it.  Hillary Clinton intends to “defend and build on this abysmal economic “legacy”.