Another monthly jobs report, another unqualified disappointment.
Just 96,000 jobs were created in August, according to Friday's monthly report by the Bureau of Labor Statistics. Monthly job-creation numbers have a margin of error of plus or minus 100,000, so a reported gain of 96,000 doesn't tell us much of anything. But the six-month average job-creation figure is now just 97,000 -- less than what is needed to simply keep up with population growth.
Source: Bureau of Labor Statistics; author's calculations.
No method of parsing the employment picture can evade the obvious: Millions are unemployed, and jobs growth is stagnant at best. Friday's report revised June's and July's initial numbers down by a combined 41,000 jobs. The economy needs to add 300,000 jobs a month from now until 2015 to bring unemployment below a healthy rate of 6%. We are nowhere near there yet.
The most complete measure of unemployment -- one that includes those who have given up looking for work and those working part-time involuntarily -- fell from 15% to 14.7% last month. That's one of the lowest levels in four years. A narrower but frequently cited version of the unemployment rate fell from 8.3% to 8.1%, a tie for the lowest level since early 2009.
Neither is much to celebrate. Both rates fell due to a decline in the denominator as people dropped out of the workforce -- and did they ever. There were nearly 400,000 fewer people counted in the workforce in August than July (though month-to-month changes in workforce are notoriously noisy).
A gaggle of analysts seized on the falling workforce figure as proof people were giving up and dropping out of the job market. No doubt this is happening. But we know there's more going on here than people simply giving up. How do we know? Because most of the decline in the labor force participation rate was predicted a decade ago, well before the recession began:
Sociologist Robert Szafran predicted a big drop in the labor force participation rate all the way back in 2002 based on demographics -- largely a factor of retiring baby boomers. Even with a booming economy, the participation rate will likely fall for years to come. We're getting older. It happens.
Some rebut that retiring old folks can't alone explain the falling participation rate, because so many of the dropouts are from the youngest cohorts. But there's an explanation for this, too. More young people aren't working because they're in school:
Source: Council of Economic Advisors, 2012.
Some of this will backfire, as many of those enrolled in college will never graduate, to say nothing of the burden of student loans. And the drop in the participation rate has been faster and sharper than demographics or education alone can explain; some people really are dropping out because the labor market is so weak. But as with so much else in the economy, there's more going on than initially meets the eye.
"That's not good enough," President Barack Obama said of Friday's employment report. "We know it's not good enough. We need to create more jobs, faster. We need to fill the hole left by this recession, faster."
Millions of out-of-work Americans could not agree more.
Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.