The Labor Department reported the economy added 169,000 jobs in August while, as the government continues to eliminate workers from the labor force payrolls, the nation's unemployment rate fell to 7.3 percent.
The Labor Department reported the economy added 169,000 jobs in August while, as the government continues to eliminate workers from the labor force payrolls, the nation’s unemployment rate fell to 7.3 percent.
Currently, 11.3 million citizens remain unemployed while the ratio of workers-to-labor force actually fell to 58.6 percent. The number of long-term unemployed (more than 27 weeks) increased to 4.3 million people, or 38 percent of the unemployed.
The underemployment rate, which aggregates the unemployed with those working part-time but desire full-time jobs and those who have ceased their current search, was 13.8 percent, or 21.3 million people.
The government removed another 516 thousand people from the labor force payrolls in August, or 0.4 percent of the total. If included back into the payrolls, the nation’s unemployment rate would have increased to 7.6 percent from July’s 7.4 percent. The government has now removed more than 10 million workers from the payrolls over the past 4.5 years. Over the past year, one million workers have been eliminated while the labor force has increased only 839 thousand.
According to Brian Turner, director and chief strategist with Catalyst Corporate FCU, the report shows that the nation’s employment sector remains weak.
“Average monthly job creation remains well under the amount needed to spur long-term economic growth. It is becoming more apparent that the government is trying to expedite hitting its targeted 6.5 percent unemployment rate at any costs – advanced mostly by its dramatic adjustment to the labor force payrolls,” notes Turner.
Without those adjustments, and at the current pace of growth, a defendable 6.5 percent unemployment rate would not be reached until late 2015 or early 2016, according to Turner. They now appear to be set on reaching that rate as early in 2015 as possible. Turner says this is key to the outlook on interest rates as the Federal Reserve has reported they are not prepared to raise their overnight rate target until we reach that 6.5 percent unemployment rate.
But reductions in the unemployed ranks should be spurring positive sentiment and increasing consumer spending.
“That has not taken place even though the unemployment rate has fallen from 10.0 percent in 2009 to the current rate of 7.3 percent. Lower consumer spending led to a decline in loan demand and resulted in tighter net interest margins for the industry,” Turner states. “Demand has increased over the past few quarters but most of the growth is concentrated within the industry’s larger credit unions ($500 million or greater in assets).”
Turner says there is a possibility that, as the unemployment rate drops closer to 6.5 percent over the next couple years, it still might not result in significant growth in consumer spending, two-thirds of the nation’s GDP.
“This would portend meager loan growth over the next few years for at least 93 percent of the number of credit unions,” Turner adds.