The American economy added 178,000 new jobs last month, 90,000 of which were needed to keep up with population growth. This means that net job growth clocked in at a modest 88,000 jobs. At first glance this seems OK, but it looks worse when you drill below the surface.
The headline unemployment rate spiked down to 4.6 percent, which is very close to a record low for the past 40 years. Unfortunately this is largely because a stunning 446,000 people dropped out of the labor force, not because a huge number of people got jobs. In fact, the labor participation rate went down, from 62.8 percent to 62.7 percent. Given this, it’s not surprising that hourly earnings of production and nonsupervisory employees were flat. If the labor market were really tightening, wages would be going up.
The general reaction to this jobs report seems to be that it shows “decent, steady growth.” I don’t agree. That is what the headline unemployment number shows, but this mostly suggests that the headline unemployment number is becoming less and less reliable as a good measure of the jobs picture. This was a disappointing report.
