The August 2012 BLS unemployment report shows total nonfarm payroll jobs gained were 96,000. Even worse news, the last two months of job gains were revised down. July's gains are now 141,000, revised from 163,000 payroll jobs and June is a now a measly 45,000 jobs, also revised down from 64,000. The August unemployment rate dropped, from 8.3% to 8.1%, but not due to people getting a job, they literally dropped off of the statistical radar. The below graph shows the monthly change in nonfarm payrolls employment.
There were 103,000 private sector jobs gained while government payrolls shrank another -7,000. Manufacturing lost 15,000 jobs.
The start of the great recession was declared by the NBER to be December 2007. The United States is now down -4.778 million jobs from December 2007, 4 years and 8 months ago.
The below graph is a running tally of how many official jobs are permanently lost, from the establishment survey, since the official start of this past recession. Increased population growth, implies the United States needs to create at least 10.6 million jobs or self-employment, using the population survey statistics. This estimate assume a 62.7% civilian non-institutional population to employment ratio, as it was in December 2007. This implies an additional 5.84 million jobs were needed over a 56 month time period beyond the ones already lost. This is just taking into account increased population against the payroll jobs gap, the actual number of jobs needed is much higher, in part because payrolls or CES, and population, i.e. CPS, are two separate employment surveys from the BLS.
The official unemployment rate dropped from 8.3% to 8.1% with 12,544,000 officially unemployed.
U-6 is a broader measure of unemployment and includes the official unemployed, people stuck in part-time jobs and a subgroup not counted in the labor force but are available for work and looked in the last 12 months. Believe this or not, U-6 still leaves out some people wanting a job who are not considered part of the labor force. U-6 dropped from 15.0% to 14.7%.
The labor participation rate, dropped from 63.7% to 63.5%. If we go back to December 2007, the labor participation rate was 66%. The highest civilian labor participation rate was in January 2000, at 67.3%. What a low labor participation rate means is there are over 6.1 million people not be accounted for in the official unemployment rate, in other words counted as employed or unemployed, many who probably need a job and can't find one, in comparison to 2007. That's in addition to the official 12.544 million unemployed.
The employment to population ratio dropped -0.1 percentage points to 58.3%. In January 2008 the employment to population ratio was 62.9%. You have to go back to the severe recession of 1983, October to find such low ratios, but in the 1983 case, the low ratios were short lived, unlike the past few years.
The low employment to population ratios clearly show people dropping out of the labor count. We can see this by the cliff dive employment to population ratio during 2008-2010. There is no way magically, suddenly, a huge increase of population volunteered to drop out of the labor force, turned 65 at once, or magically all went to school. These are mostly people plain out of a job. The cliff dive in employment to population ratio represents about 11.2 million people, which is around the same amount of jobs really needed to keep up with population growth calculated above using payrolls.
The official unemployment rate is a ratio, a percentage during a limited time period to calculate the number of people actively looking for a job and counted. Many people are not counted in the official unemployment statistics. Truth is America has more potential workers and less jobs in this so called recovery than any other period past the Great Depression.
How did the U.S. add only 96,000 jobs yet the unemployment rate actually decreased? The BLS employment report is actually two separate surveys. The jobs number comes from the CES, or establishment survey where the unemployment ratios comes from a different survey, the CPS, otherwise known as the household survey. The unemployment rate is a ratio of those officially unemployed to those officially counted as part of the labor force and comes from the CPS. In the below graph are the monthly change in unemployed from the household survey.
Less people were considered part of the labor force in August. Those not in the labor force increased by 581,000 while the overall non-institutional population rose by 212,000.
The civilian labor force decreased by -368,000, whereas those officially unemployed dropped by -250,000. Below is a graph of the never ending volatile and often shrinking labor force.
Yet those officially employed also decreased by -119,000. In other words, the payrolls survey, CES, says jobs increased while the population survey, CPS, says jobs actually decreased. The population survey also shows a huge number of people dropped out of the labor force. In other words, by the CPS, we actually lost jobs for the month yet the people dropping off of the official count of unemployed was so massive, it reduced the official unemployed statistics.
There are differences between payrolls and employment levels from the CPS. Payrolls counts employer jobs whereas the population survey also counts the self-employed, unpaid family workers, agricultural workers, and private household workers. That said, the margin of error for the CES is 100,000 whereas the CPS has a 400,000 margin of error on the payrolls and employed statistics respectively. Going off of the monthly changes of the CPS survey is statistically risky. The monthly changes are highly noisy and the CES, or payrolls survey is deemed more accurate and stable.
That said, this is simply a horrific report, we need around 100,000 payroll jobs each month just to keep up with population and today's figures, along with the revisions show that's not happening.
For more information on how the BLS tabulates non-farm payroll jobs, see this article, Under the Hood of the Employment report.
Here is last month's overview, only some graphs revised.