August Employment Report in Line with “New Normal” Economy

The headline numbers from the “establishment survey” portion of the August employment report (link provided above) are downright awful.  No jobs added.  Pay is down.  The work week shrank a little.  But the news from the “household survey” portion of the report isn’t as bleak.  While unemployment held steady at 9.1%, the “employment level” actually grew for the first time in five months by a healthy 331,000 workers.  But, like magic, 366,000 workers from the “mysteriously vanishing labor force” reappeared, so the unemployment rate remained the same.  (If they hadn’t reappeared, the Bureau of Labor Statistics would have been in the uncomfortable postion of explaining how unemployment fell by 0.2% when the economy added no  new jobs.) 

Here’s the calculation, followed by the chart of unemployment:

Unemployment Calculation     Unemployment Chart

Notice on the chart how my calculations of unemployment (U3a and U6a) marched in lockstep with the BLS’s until the recession really took hold and unemployment began to climb.  That’s when the BLS began banking workers in its “mysteriously vanishing labor force” pool, keeping the official unemployment rates (U3 and U6) artificially low. 

What you can see is that the August data falls in line with the “new normal” economy, where something in the range of 9% unemployment is here to stay.  In fact, I’ll predict at this point that unemployment will never improve (with the possible exception of an optimism-fed, brief rebound in the economy following the election of a new president in 2012) until U.S. trade policy is dramatically revised. 

And here are the charts of the parameters I’ve been following: 

Labor Force & Employment Level     Unemployed Americans     Per Capita Employment

As you can see, all of the data is range-bound at the “new normal.”  The problem is that the longer the “new normal” is with us, the more Americans (especially the younger ones) will accept it as “normal” and pressure on political leaders to do anything about it will slowly wane.  It’s just sad. 

* * * * *

The establishment survey breaks down the change (or lack of change) in jobs as follows:

  • Health care:  + 30,000
  • Computer systems design & services:  + 8,000
  • Mining:  + 6,000
  • Temporary help:  + 5,000
  • Manufacturing:  – 3,000
  • Government:  – 17,000
  • Information Industry:  – 45,000

  • Construction:  unchanged

  • Trade, transportation & utilities:  unchanged
  • Financial activities:  unchanged
  • Leisure & hospitality:  unchanged

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