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Friday, August 6, 2010

From Unemployed to Out of the Workforce

WSJ reports:

The U.S. economy shed more jobs than expected in July while the unemployment rate held steady at 9.5%, a further sign the economic recovery may be losing momentum.

Nonfarm payrolls fell by 131,000 last month as the rise in private-sector employment was not enough to make up for the government jobs lost, the U.S. Labor Department said Friday. Only 71,000 private-sector jobs were added last month while 143,000 temporary workers on the 2010 census were let go.

As EconomPic has detailed many times before, employment can fall while the unemployment rate stays flat (or in cases drop) because the denominator (i.e. the workforce) has been dropping. As the chart below shows, the duration of unemployment has increased dramatically over the past year and a half AND at a certain point these individuals simply drop out of the workforce.

Note the dip earlier this year and the "rebound" from temporary census hiring. Perhaps we need some new temporary hiring efforts before more yellow rolls to blue.

Source: BLS