The jobless rate fell to 8.1% last month – the lowest in three years, but don’t consider that good news. Even though the rate fell, the labor market also lost some momentum.
The economy added just 96,000 jobs in August – barely breaking even with population growth. And the reason the jobless rate fell is that people dropped out of the workforce altogether. In other words, the jobless rate fell because the labor force got smaller, not because there were more jobs.
Something like 368,000 people simply gave up looking for work…which means that just 63.5% of the working age population is actually participating in the labor force – that’s the lowest percentage since 1981.
There is no reason to cheer because this was a weak jobs report. A drop in the jobless rate would make a good headline, but not when that drop happens only because the labor market is thinning out.