The Bureau of Labor Statistics (BLS) released its monthly jobs report, and the topline result appears to paint a rosy picture of the U.S. economy. The most watched figure in the report, the unemployment rate, finally fell to pre-pandemic levels (3.5%) after two years of trying to recover from the drastic loss of jobs in 2020. While this number is positive, the economic reality of the country is a far more complicated and less rosy one.
Democrats have paraded the BLS numbers, which surpassed expectations, on social media. President Biden tweeted that the job report showed that “more people are working today than at any point in American history. That’s no accident, it’s results.” While President Biden is entitled to brag about the report and he is right that the Job report does show one of the lowest unemployment rates in history, the reality of the U.S. economy is far more complicated than the initial 3.5% unemployment rate indicates.
The number of people employed in construction jobs in the United States continues to fall. (Image: EFE)
The buried details in the July job report
While the unemployment rate was surely lower in July than in June, the reality is that the other two indicators that must be used to understand the true strength of the economy (the labor force participation rate and the average hourly earnings of employees) are not as positive. The former remains 1.3 points lower than before the pandemic and the latter increased by a far lower pace than the inflation rate has grown over the last 12 months.
Counterintuitively, the unemployment rate does not measure the percentage of people of working age that do not have work. Instead, it measures the number of unemployed people among those who are actively looking for a job and it leaves out the people who don’t have a job but are also not looking for one.
In order to really have a bigger picture of who is working and who is not, we need to look into the labor force participation rate, which measures the percentage of people who are economically active (meaning both employed and looking for a job) compared to the total amount of people of working age. Another data point that is important to look into is the employment-population ratio, which measures people who are employed compared to the entire working-age population.
More than 22 states have lifted federal unemployment benefits, implemented to address the coronavirus emergency. (Image: EFE)
What the July job report shows is that while 528,000 jobs were added last month, the amount of people who are part of the labor force has yet to reach the pre-pandemic levels of 2020, which was 63.4% in February 2020, and the number of people who are employed in comparison to the total percentage of the population is also lower than the pre-pandemic years, 60% today compared to 61.2% in 2020. The BLS data also shows that 5.9 million people are not part of the labor force (hence not counted in the unemployment rate) want a job, a significant increase from the 5.0 million people in February 2020.
Furthermore, the data on earnings was also worrisome. The BLS report showed that average earnings for non-farmer workers rose by 15 cents (a 0.5 percent increase) between June and July. While the BLS has yet to release July’s inflation data, when this data is compared with June’s inflation numbers the picture is stark. While the average wage increased less than one percent over the last couple of months, the average prices of all items grew by 1.3% between May and June, with the numbers even worse when checking the 7.5% increase in energy prices and the 11.2% hike in gas prices.
Annually the numbers are just as bad when compared annually, as wages only increased 5.2 percent over the last 12 months, which is far less than the 9.1% price increase between June 2021-2022.
President Biden may give himself some congratulatory pats on the back, and while the July job report is certainly good news, there are also some warning signs on the horizon.
Daniel is a Political Science and Economics student from the University of South Florida. He worked as a congressional intern to Rep. Gus Bilirakis (FL-12) from January to May 2020. He also is the head of international analysis at Politiks // Daniel es un estudiante de Cs Políticas y Economía en la Universidad del Sur de la Florida. Trabajo como pasante legislativo para el Representate Gus Bilirakis (FL-12) desde enero hasta mayo del 2020. Daniel también es el jefe de análisis internacional de Politiks.