It used to be that decreases in the unemployment rate were measures of jobs being created. Sadly, in the Obama economy it is an indication of despair as more and more unemployed drop out of the job market. In the United States, if a person is not collecting unemployment benefits, they are not counted in the labor pool.

Arguably, some of the decline is due to the aging baby boomer demographic as workers shift from collecting paychecks to social security pension income. That is still not enough to account for the decline in the labor participation rate.

The August jobs report showed that 169,000 jobs were added but the total labor participation rate declined to 63.2% which is the lowest on record in 34 years. While at face value, 169,000 jobs looks moderately impressive, bear in mind that during the peak of the Reagan years, there were 500,000 jobs being added monthly in the economy in a population about 25% smaller than it is now.

In addition, the July jobs figure was lowered from 162,000 to 104,000. This sets the stage for the looming budget battles between Obama and the GOP-controlled House of Representatives later this year. Also, speculation is rife that the weak jobs report will keep the Federal Reserve buying up US debt that other nations are unwilling to finance.

Source material: