August Employment Report

The headline numbers from today's report on the job market are that the unemployment rate declined to 7.3% and the economy added 169,000 jobs.  Beneath the surface, the report shows some weakness.  Job growth for June and July were revised down by more than 70,000; employment growth has averaged 148,000 per months over the last 3 months (just under 158,000 in the private sector).  Nearly one-third of net jobs created over the last 3 months have been in retail trade and 2/3 have been in retail trade, food/drinking places, temp jobs, and home health services (relatively low paying jobs).

Why did the unemployment rate decline?  The labor force participation rate fell to 63.2%, the lowest since the summer of 1978.  A major reason for the decline is that, for men over the age of 20, the participation rate declined by 0.3% to 72.3%, the lowest since records started being kept in 1948 (the participation rate didn't change for adult women).  The employment-population ratio declined slightly to 58.6%, which is where it began 2013 (and 2012).  As with the participation rate, the employment-population ratio declined significantly while it rose slightly for adult women.  What about part-time vs. full-time jobs?  There was a shift from part-time to full-time employment last month (modest increase in full-time jobs, noticeable decline in those working part time for economic reasons), but 60% of net jobs created in 2013 are still estimated to be part time.

Add it up and the job market is improving modestly (not as strong as some were thinking).  On a positive note, the ISM service index for August was very strong and auto sales have risen to the highest level since 2007.  On the flip side, it remains to be seen how much a drag the recent spike in interest rates will have on the economy.  So how's the economy doing?  Modest growth in terms of output (GDP) and jobs with some preliminary signs of a possible pickup in the coming months.