The Bureau of Labor Statistics released another humdrum, “new normal” employment report for the month of July on Friday morning. Non-farm payrolls added 162,000 jobs – below expectations and the lowest level in four months. The unemployment rate dipped by 0.2 percent to 7.4% – the best level in 4-1/2 years. However, though the labor force participation rate improved very slightly, it has barely budged since the depths of the recession. What this means is that the economy has barely added enough jobs to keep pace with the growth in the labor force caused by immigration-fueled population growth.
Commenting on the report, New York Times columnist David Brooks, a conservative, commented during the PBS Newshour’s “Brooks and Marcus” segment on Friday night that, in the wake of this report, “… the structural problems are becoming super-obvious … we’ve got some deep structural problems …” Obama bashing by a conservative columnist? No. His liberal couterpart, Washing Post columnist Ruth Marcus, agreed with him. Brooks went on to comment that “something really fundamental has shifted in the economy,” that no one seems to have answers and that our political system is ill-equipped to deal with it.
Brooks cited some factors, but can be forgiven for missing the real issue (since even economists don’t recognize it) – that continued population growth is whittling down per capita consumption, adding workers to our labor force at a pace incommensurate with the economy’s ability to absorb them.
This weak employment report is corroborated by the equally weak preliminary report of 2nd quarter GDP growth, released two days earlier, which showed the economy grew by a measley 1.7%, on top of an even weaker 1st quarter growth of 1.1%. What’s amazing is that this economic weakness is in spite of the Federal Reserve pumping a trillion dollars into the economy over the past year. Something is indeed “structurally wrong” when the economy fails to respond to such unprecedented stimulus.
The following are additional high-lights from Friday’s employment report that underscore the weakness of the report:
- Both the May and June reports were also revised downward by a total of 26,000 jobs.
- The number of long-term unemployed was unchanged in July.
- The employment to population ratio was unchanged.
- The number of people employed part-time for economic reasons was unchanged.
- The number of discouraged workers, 988,000, is up 136,000 from a year earlier.
- The job growth was concentrated in low-wage sectors: retail (47,000 jobs), and restaurants and bars ( 38,000).
- Manufacturing employment was flat, in spite of a growth of 9,000 jobs in the auto industry. This means that the rest of manufacturing actually contracted by the same number.
- Employment in the health care industry has stalled, as I’ve long predicted it would. In 2012, health care added an average of 27,000 jobs per month. In 2013, that’s fallen to an average of 16,000 jobs. In July, it fell to zero.
- The average work week fell by 0.1 hours in July. In manufacturing, it fell by 0.2 hours and overtime declined by 0.2 hours to 3.2 hours per week.
- Average hourly earnings fell by 2 cents.
Something is structurally wrong with the economy. It’s structured around trade policy based on flawed trade theory that’s guaranteed to result in a huge trade deficit in manufacturing goods. And it’s structured around a reliance on population growth to stoke economic growth, a flawed strategy that’s now destructive and self-defeating.