AUGUST JOBS DATA: Solid Numbers Boosting Recovery

By at 4 September, 2020, 12:33 pm

by Raymond J. Keating-

On the long road to recovery, August ranked as a solid month in terms of employment, based on the latest jobs report from the U.S. Bureau of Labor Statistics.

The establishment survey pointed to payroll gains of 1.37 million in August, which fell in line with a notable slowdown over the past two months. Consider that payrolls increased by 4.78 million in June, by 1.48 million in July, and then this 1.37 million in August.

However, the second survey included in this monthly report is the household survey. While this survey tends to be more volatile from month to month, it also better captures startup and small business activities.

According to the household survey, August was more robust in terms of the recovery. Employment grew by 3.76 million in August, while adding 5.1 million jobs since June.

And after declining in July, the labor force expanded by 968,000 in August. Also, those not in the labor force declined by 783,000.

In addition, while the unemployment rate fell from 10.2 percent in July to 8.4 percent in August, that measure of the jobs market can be an unreliable guide as to what’s actually happening in terms of the labor force and employment. More informative are the employment-population ratio, and the labor force participation rate.

The employment-population ratio moved from 54.6 percent in June to 55.1 percent in July and 56.5 percent in August.

The move in the labor force participation rate has been less robust, but still positive, with the rate going from 61.4 percent in July to 61.7 percent in August.

Of course, this is a small snapshot of what’s been happening in terms of employment. There are two comparisons that matter right now.

First is a comparison of the latest month’s data to the bottom that was hit in April. Doing this comparison, we see some noteworthy progress in climbing out of a deep hole.

For example, employment hit bottom at 133.4 million in April, with an employment-population ratio of 51.3 percent. By August, employment had risen by 13.9 million since that April bottom, with the employment-population ratio registering 56.5 percent. So, the April-vs.-August comparison is encouraging.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

Second is a comparison of the latest month’s data to where we were before the pandemic hit. Doing this comparison, we see how far we still have to go to climb out of this pit.

For example, employment registered 158.8 million in February, versus August’s 147.3 million. That is, we’re still down by more than 11 million jobs. Also, the employment-population ratio stood at 61.1 percent in February, while registering 56.5 percent in August. So, the February-vs.-August comparison serves as a sober reminder of just how far we have to go to merely get back to where we were before the pandemic.

One final thought cuts both ways. First, the gains reported by the household survey point to some kind of recovery going on among American small businesses. Second, the immediate weeks and months after hitting bottom were bound to provide some degree of snapback, but the hard work lies ahead when it becomes clearer how many small businesses have closed their doors permanently and how many individuals have decided to exit entrepreneurship altogether.

Policymakers need to come together and recognize that the U.S. needs a rebirth of entrepreneurship, and that means a truly pro-entrepreneur policy foundation featuring low taxes, light regulatory burdens, free trade, restrained government spending and sound money.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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