TheÂ job market was lousy again in August, and next month things will look even worse.
I know, that’s not what other people are saying. On Wall Street and on those TV business channels that kowtow to the financial community, the 169,000 gain in new jobs reported Friday was described as acceptable.
But yesterday’s number – that 169,000 gain plus an artificial drop in the unemployment rate to 7.3 percent, from 7.4 percent – was bad news all around.
First, the gain of 169,000 jobs was enough to allow the Federal Reserve to start cutting back – “tapering” is the word people like to use – its deadly “quantitative easing” money-printing program.
The next Fed meeting is later this month, and that’s when this tapering process could begin.
One part of Wall Street was hoping the August employment report would be horrible so that those members of the Fed’s Open Market Committee who don’t want to taper would have more ammunition.
But at 169,000, the headline figure didn’t support the so-called doves on the FOMC. That’s bad news.
Second, the Labor Department corrected its two previous months of employment data.
June’s job growth, it turns out, wasn’t 188,000, as previously reported. It was only 172,000. And the earlier-reported gain of 162,000 jobs in July was also incorrect. July’s improvement was revised down to just 104,000 jobs.
This is one of those “I told you so” moments that my readers have come to love. As I’ve said over and over in this column, the Labor Department makes wild assumptions about jobs it thinks – but can’t prove – are being created by newly formed companies.
It announces the bloated number and then corrects it later when people are distracted by the next month’s headline number.
So, you can expect August’s 169,000 gain to also be reduced in the future. The Labor Department added 90,000 of these phantom jobs to August’s count.
The third piece of bad news: the aforementioned drop in the unemployment rate, to 7.3 percent, in August. The Pollyannas out there will look to this as the bright side of yesterday’s report.
But the problem is that the “participation rate” in the workforce declined to 63.2 percent in August, from 63.4 percent in July.
When people tell government surveyors that they have left the workforce, those people are no longer counted as unemployed. In a healthy economy, the unemployment rate declines because people have found jobs, not because they have quit looking.
Finally, the fourth bit of bad news: The common belief is that 250,000 new jobs are needed every month just to accommodate people trying to enter the workforce for the first time.
So, 169,000 new jobs can only be a good number if you buy into the notion that people have suddenly and voluntarily decided not to work. And that notion is too far-fetched for me.
In Tuesday’s column, I will explain why the September employment numbers could be a real downer.