While the U.S. jobs data released on Friday was an improvement over prior months it was not as rosey as many claimed. The offical unemployment rate declined from 9.5% in June to 9.4% in July, but this is misleading. Over the next several days I will post charts that will help give a better perspective on the jobs picture in the U.S.
The first chart above shows the number of total unemployed persons in the U.S. over the past few months. If you just look at this chart, you again would be mislead. The chart clearly shows that the number of unemployed persons in the U.S. declined in July. Good news, right? I will answer that question with another question. What happened to the people that are no longer unemployed? Did they find jobs, or did they fall out of the offical labor force? I’m thinking the later. Why? Look at the second chart.
The second chart shows the total number of employed persons in the U.S. If the total number of unemployed persons declined in July, wouldn’t you expect the total number of employed persons to have increased? Yes. But, it did not. What happened was the offical labor force shrank. One way this happens is when people have been unemployed for so long that they stop looking for work. The government then just excludes these persons from the labor force. They are not employed or unemployed - just out of the labor market.
Tomorrow I will have a chart on payroll numbers.
Data source:
U.S. Bureau of Labor Statistics
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