Economics Professor Thomas "Danny" Boston breaks down the new unemployment numbers, which were released today by the Labor Department.
The unemployment rate declined from 8.3% in July to 8.1% in August. However, the number of new jobs created (96,000) was less than expected. This is disappointing because the economy created 141,000 jobs in July. Economists predicted 125,000 to 140,000 new jobs would be created. The decline in the unemployment rate was largely caused by 368,000 workers dropping out of the labor market.
Ironically the underlying economic indicators are much stronger than the labor market report indicates.
The economy is stronger than the number of jobs created suggests. For example, motor vehicle sales continue to rise, retail sales have increased, new home sales have increased, consumer sentiment is up, and oil prices have stabilized.
If this is true, then why is it not reflected in the labor market report? For two reasons:
- A significant number of jobs are not likely to be created until after the election. Businesses are awaiting the outcome of the election before making major investment decisions.
- Investment uncertainty is caused by the European debt crisis, the potential of the fiscal cliff and the presidential election.
President Obama is 86,000 jobs short of regaining all jobs that were lost during his presidency.
However, the economy still needs 4,172,000 jobs to recover all that were lost during the recession.
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