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Why a Drop in the Unemployment Rate Is Tragic

According to this morning's report from the Bureau of Labor Statistics, the unemployment rate for August fell to 8.1% compared to 8.3% in July. If you like your news positive and grossly oversimplified stop reading now. The details on the report are hideous.

Consider:

  • Nonfarm Payroll Employment rose by 96k compared to estimates of 125k - 130k and a far cry from the average growth of 139k in 2012. Last year the average monthly gain was 153k.

  • July's NFP number was revised lower from 163k to 141k.

  • The greatest gains came from the food services and drinking sector. In other words, from waiting tables or bartending. These are some of the most brutal, lowest paying jobs extant.

  • The labor force participation rate fell to 63.5%, the lowest read in over 30 years. When this number goes down so does the stated unemployment rate. To get to 8.1% unemployment, 368,000 Americans had to drop out of the labor force.

No matter what you hear or read elsewhere, America's job picture is getting worse. Much, much worse. My Breakout co-host Matt Nesto and I discuss the report in the attached clip.

Starting with the participation rate, Nesto notes that "almost 400,000 people dropped out, just gave up" looking for work in August. For each one-tenth of one percent improvement in the unemployment rate, 184,000 Americans had to become quitters.

Quitting could mean going on disability, going into the grey market (read: getting paid cash for odd jobs), doing something illicit, or begging. Whatever they're doing instead of working or looking for legitimate jobs, 368,000 Americans gave up on participating in the economy in August alone.

What would it take to make you just give up entirely? That's what hundreds of thousands of your fellow Americans went through last month. Think about that if anyone tries to tell you a drop in the headline rate is anything but more evidence of an ongoing national disgrace.