Digging into job numbers unearths key information

Raymond Keating
Raymond Keating

The media and assorted experts are notorious for running with the topline numbers from the monthly employment report. But more often than not, the jobs report requires at least a little bit of digging. That’s definitely the case with the August employment report from the U.S. Bureau of Labor Statistics.

The topline information that will get widely reported is nonfarm payroll employment increased 188,000 between July and August as the unemployment rate rose from 3.5 percent to 3.8 percent. The reasons for this seemingly contradictory information largely will be ignored, never mind exploring why the unemployment rate increased.

So, let’s dig a little.

The increase in nonfarm payroll employment, which comes from the establishment survey of businesses, of 188,000 was respectable. But it doesn’t really tell us much more than the increase in employment among larger and more established businesses.

The unemployment rate, derived from a separate household survey, requires further exploration. It always does because the jobless rate can be misleading in terms of what’s actually happening with the underlying numbers that truly matter.

In August, unemployment actually rose by a substantial 514,000. But employment also increased 222,000. Why was that? Because the labor force jumped 736,000.

While the unemployment rate increased, the rise reflected welcome underlying labor market trends. The labor force increased as people moved off the sidelines and into the workforce, either getting jobs or seeking work. At the same time, employment increased.

So, the labor force participation rate increased from 62.6 percent in July to 62.8 percent in August. That’s the highest level since the onset of the COVID-19 pandemic in the United States in February 2020, but still short of where we were before the pandemic.

At the same time, though, the labor force participation rate among the those in the key working age category of 25 to 54 years old registered 83.5 percent in August. That exceeds the pre-pandemic level of 83.1 percent hit in January 2020 and the immediate pre-Great Recession high mark of 83.4 percent in January 2007.

While still short of its all-time high of 84.6 percent hit in January 1999, this participation rate among 25 to 54 year olds, when put alongside the overall labor force participation rate, is another signal U.S. population stagnation is a real and significant issue.

What’s needed? The U.S. requires a dramatic shift in immigration policies so that we, once again, become a welcoming nation to those who wish to come here to work and build businesses. By the way, immigrants have a much higher rate of entrepreneurship than do the native born. People from around the globe want to come here to pursue their dreams. It’s a good idea to welcome them and appreciate their efforts.