The unemployment rate has finally dropped below 8% to 7.8%! Or has it? Really?
The latest numbers are a head scratcher. The Bureau of Labor Statistics (that’s BLS, not BS) reported that only 114,000 non-farm payroll jobs were added in September. That’s well below the 206,000 increase in the working age population.
As we’ve previously reported, the overall unemployment rate has been dropping not because new jobs are being created, but because many people have stopped looking for work or are underemployed in part-time jobs.
Yet the BLS reported that 418,000 people were added to the labor force in September. So how can the unemployment rate fall when the number of people added to the labor force is nearly four times the number of new jobs created?
Have hundreds of thousands of people suddenly become farmers, in which case they wouldn’t be included in the stat? That’s not it.
The BLS explains that, “The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) rose from 8.0 million in August to 8.6 million in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.”
In BLS-speak, people who are underemployed – i.e., all of those new involuntary part-timers — are counted as being fully employed and those who have given up looking are not counted as being unemployed.
Still, a sudden jump of 600,000 part-time jobs in a month is hard to believe, as it is inconsistent with previous months.
Is progress finally being made on the employment front? Or is it just convenient to the Presidential election that the unemployment rate has finally fallen below 8%?
As one analysis put it, “how do you have a 600k jump in part-time employment in just one month before the beginning of retail season with nobody realizing it until the BLS published today’s report?”
Even if the unemployment rate has indeed dropped to 7.8%, as the BLS reports, keep in mind that the drop is to the commonly reported U3 rate. The broader U6 rate, which includes those who had stopped looking for work is at 14.7%.