–Updating 10:30 ET Story, Adding Allard, Eberly Quotes
–August Payrolls +96,000; Unemployment Rate 8.111%

By Denny Gulino

WASHINGTON (MNI) – Looking deep into the disappointing August jobs
report, there was a rare sign of movement in an obscure measure within a
labor force that has hit a three-decade low participation rate, an
upward spike among those who “want a job” but aren’t yet looking for
one.

The Bureau of Labor Statistics Friday reported August payrolls up
only 96,000, well below expectations for 129,000, with hopes for more
having been lifted by Thursday’s ADP measure of 201,000 in the private
sector. Without seasonal adjustment, payrolls actually grew by 252,000
in the month.

The fact the payrolls number was positive was doubtless scant
encouragement at the White House, looking for some new signs of strength
as the election approaches. The improvement in the unemployment rate,
back to its low of the year of 8.1%, again had nothing to do with hiring
momentum.

The rate improved only because “all of the population growth and
the change in the labor force went into the category of ‘not in the
labor force,'” Dori Allard, chief of the BLS Division of Labor Force
Statistics, told MNI. “The employment rate went down because the labor
force went down.”

The category of ‘not in the labor force’ jumped by 581,000,
rivaling the April expansion of 522,000 that triggered market murmurs
about political manipulation of the unemployment rate.

In May, that category declined again and may well in September, yet
the fact remains that whatever influence the financial crisis had to
accelerate the lifelessness of labor force expansion, it’s continuing.
In fact, people have been exiting the labor force for a lot longer.

The labor force participation rate in August dropped by 0.2 points
to 63.5%, the lowest since September 1981, Allard said. The remarkable
paring of the portion of the population working has been blamed on a
variety of long-term trends, particularly the aging of the labor force
overall. “People who are older tend to have lower force participation
rates,” she said.

The crisis may also have increased those returning to school to
upgrade skills and some analysts have blamed what had been particularly
extended jobless benefits for dampening the urge to get back to work.
With those unemployed six months or longer still at 5 million in August,
40% of all the unemployed, relatives and friends may be prone to
discouragement about job prospects to a greater degree than normal.

Within that category of those not in the labor force one measure
showed a sharp and unusual increase, she said. Those not included in the
labor force who answer a screening question in the monthly survey saying
they “want a job,” jumped 403,000, without seasonal adjustment.

If they want a job, why aren’t they included in the labor force?
“They haven’t looked” in the past year, Allard answered. “The majority
of them aren’t even included in the ‘marginally attached to the labor
force’ measure either, because they haven’t looked in the last year.”

Further elaborating, she said the increase “isn’t good or bad or
indifferent, it just is,” but that “no one can say they are afraid to
look for work,” since there are many reasons, like family
responsibilities, that interfere with jobseeking. The question that
reveals their desire for a job even though they are not looking she said
is a “screening question that allows us to get at some of the other
categories,” like finding those only marginally attached to the labor
force.

The BLS measure of those who want a job but aren’t looking “is
somewhat volatile,” she continued. “There was a movement downward last
year in May of 302,000, and a movement upward in June of 315,000.”

Now the numbers who say they want a job has grown some more,
suggesting more people may finally start looking again soon. “It’s
August, and sometimes people take vacations in August and sometimes who
are not employed, people who are employed, people who are looking take
vacations so that could be complicating things a bit.”

If indeed they do formally enter the labor force by looking for a
job and if jobs are not available, that would tend to make the
unemployment rate increase, all else being equal. However, to the extent
they are skilled labor looking to fill slots for which there is a
shortage of applicants, then their reentrance would tend to make the
jobless rate decline.

At the Treasury Department chief economist and Assistant Secretary
Jan Eberly noted while briefing reporters that the decline in the August
labor participation rate was “concentrated among men,” making it “clear
that looking at this report our focus should continue to be on creating
jobs that affect not only employment but labor market behavior … and
those potentially in the labor market.”

The August decline in manufacturing, of 14,000 after adjustment, is
again a number clouded by the changing patterns of retooling layoffs in
the auto industry, BLS’ Allard said. In July, manufacturing rose 14,000
because “fewer people had closed for retooling” and this month “fewer
workers were recalled, so some of that is probably due to a seasonal
change.”

Eberly agreed, saying the “relatively strong” auto sales pace in
July and August was inclining manufacturers toward shorter retooling
periods. She also said that the problems in Europe and a slowdown
globally is affecting U.S. exports and is “among a number of headwinds
and challenges in jobs growth.”

As the new pattern establishes itself, it will be captured in
future seasonal adjustment factors, but for now, “we see a difference
every year in how they’re doing it,” Allard said.

Likewise, she said, the 9,000 increase in utility workers was
simply the return of 8,500 Consolidated Edison workers who had been
locked out.

The unemployment rate in August of 8.111% compared to the July rate
barely into the 8.3 range, at 8.253%.

Chairman of the White House Council of Economic Advisors Alan
Krueger, said the employment report “provides further evidence that the
U.S. economy is continuing to recover from the worst downturn since the
Great Depression.” A Republican Party spokesman said the report shows
the string of months with unemployment above 8% has now stretched to 43.

** MNI Washington Bureau: 202-371-2121 **

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