The Bureau of Labor released its most recent jobs report today and at first blush, the numbers are a bit confusing. In total, there were 125,000 jobs lost last month and just 83,000 new private sector jobs were added. Yet somehow the unemployment rate actually dropped from 9.7% to 9.5%, which is the lowest it’s been all year.
So how exactly does our unemployment rate improve this much when the workforce itself seems to be losing more jobs than it’s gaining? As many publications have pointed out already, the number of jobs lost in June was inflated because the government let go of many temporary workers hired by the U.S. Census. However, the larger reason is the incredible and mostly underreported shrinkage of the labor market.
First, it’s important to understand that each month, the Bureau of Labor actually releases two reports: one is a survey of the number of jobs that are gained or lost and another calculates the unemployment rate (the number of people not employed, though still actively looking for work).“These two different surveys usually sync up over the long term, but over a one month period they are not going to always tell the exact same story,” said Sharon Cohany, an economist at the Bureau of Labor statistics. That said, Cohany admits that the improved unemployment rate may seem at odds with the meager jobs report. “These are not necessarily contradictory, although they are not necessarily consistent either.”
One key fact that Cohany highlights which may have gotten lost among all the other data is that the U.S. civilian labor force has declined “quite a bit.” And what she really means is that the size of our labor force has just shrunk by its largest amount all year. Overall, 652,000 Americans left the civilian labor force last month. By comparison, about 300,000 left the labor force in May and in the four months prior to that, there were actually increases in the number of people entering the labor force.