Unemployment sinks as jobless quit looking

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National unemployment declined slightly in August to 7.3 percent from July's 7.4 percent and the number of jobs grew by 169,000, but while those numbers look good, they were hiding an overall weak economic report from the Bureau of Labor Statistics.

The unemployment rate fell because so many people gave up on the labor market and were no longer looking for work.

In August, the labor force participation rate -- the percentage of people in the population who are 16 and older who are either working or looking for a job -- was 63.2 percent, the lowest it has been since 1978. That was the result of a decline in the civilian labor force of 312,000 people as 115,000 fewer people said they were working and another 198,000 people who were unemployed quit looking for work. The figures are statistically adjusted to account for seasonal spikes and dips.

"At some point, when the levels stay low for so long, there's something structural about it," said Doug Handler, the chief economist for Lexington, Mass.-based IHS Global Insight.

Mr. Handler noted that the number of men in the workforce declined last month by 339,000 while the number of women increased by 27,000.

Unemployment for adult men, over age 20, rose in August from 7 percent to 7.1 percent as the unemployment rate for adult women declined from 6.5 percent to 6.3 percent.

The news was neither so good nor so bad to make it obvious whether the Federal Reserve would go ahead with its plan to reduce the rate at which it has Treasurys and other bonds.

Stocks ended the day mixed with the Dow Jones industrial average closing down 14.98 points at 14,922.50 or 0.1 percent; the Standard and Poor's 500 Index was essentially flat, up 0.01 percent or 0.09 points at 1,655.17; and the Nasdaq was up by just 0.03 percent or 1.2 points to close at 3,660.01.

The monthly report from the Bureau of Labor Statistics is made up of two reports, one that is based on a telephone poll of households, known as the population survey, that determines the unemployment rate. The other is a survey of employers to determine the nation's payroll.

The establishment survey found that the nation's employers added a net of 169,000 in August, which was less than economists had expected and immediately diminished by revisions that took a total of 74,000 jobs off the gains for June and July. That brought the three-month average job gain down to 148,000.

Manufacturing gained 14,000 jobs, after five months of job losses. The Alliance for American Manufacturing in Washington, D.C., noted that with the jobs added in manufacturing in August, there has been a net gain of 12,000 manufacturing jobs this year.

Alan Tonelson, a research fellow at the U.S. Business and Industry Council in Washington, D.C., said the improvement in manufacturing jobs was nearly entirely from the rehiring of workers who were temporarily laid off as auto manufacturers retooled factories for the new model year.

He said while there have been improvements in worker productivity due to automation, the bigger factor in lost manufacturing jobs is the off-shoring of manufacturing that is allowed by free trade agreements, which have increased the trade deficit.

Mr. Tonelson said even the manufacturing jobs that are being created are at much lower wages than similar jobs had been paying before the recession. That is because unions have agreed to lower tiers of wages for new hires and because some manufacturing companies are paying just over minimum wage.

Sectors that added jobs last month included retail trade, which added 44,000 jobs, and leisure and hospitality, which added 27,000 jobs.

Mr. Tonelson said the high-profile move to raise wages in those industries may backfire on workers as employers would have increased incentives to further automate that work.

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Ann Belser: abelser@post-gazette.com or 412-263-1699.


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