Today’s report from the Bureau of Labor Statistics (BLS) that the economy added 162,000 nonfarm payroll jobs (161,000 in the private sector) disappointed to the downside, especially considering the downward revisions to prior months’ data. Net of revisions nonfarm payrolls increased by 136,000 and private sector payrolls increased by 135,000.
BLS also reported that the unemployment rate ticked down to 7.4% in July from 7.5% in June. The employment-to-population ratio held steady at 58.7% and the labor force participation rate ticked down by 0.1 percentage point to 63.4%. The decline in the unemployment rate was the result of the decline in labor force participation.
During the recession, the unemployment rate peaked at 10.0% in October 2009. The decline to 7.4% is largely a mirage, driven by declining labor force participation. Had labor force participation not declined since January 2009, the unemployment rate would stand at 10.6%, much higher than the official rate of 7.4% as well as the 5.0% rate that passage of the 2009 stimulus legislation was supposed to deliver.
This point is reinforced when looking at the employment-to-population ratio which has actually declined since the end of the recession and has only increased 0.2 percentage point since the unemployment rate peaked in October 2009. By comparison, while the employment-to-population ratio has declined 0.7 percentage point since the end of the “Great Recession”, over the comparable 49 months of the Reagan recovery the employment-population ratio increased by 3.7 percentage points.
While private sector employment has increased by 7.3 million (6.9%), since hitting bottom in February 2010, during the other recoveries since World War II, the average comparable increase was equivalent to more than 11.3 million leaving a private sector jobs gap of 4.0 million. The gap is even more pronounced when comparing the current recovery with the Reagan recovery. This recovery’s private sector jobs gap compared to the Reagan recovery stands at 6.8 million.
The President has argued that we need to grow a strong middle class. However, since taking office, while employment (as measured by the household survey) has increased by 2.1 million, the number of persons on food stamps as increased by a staggering 15 ½ million.