One of the most important economic releases to come out each month is the Employment Situation Summary report issued by the Bureau of Labor Statistics. This report presents a range of data series related to the nation’s employment and unemployment. The report is compiled by the BLS and the Bureau of the Census, and contains data from two separate surveys: The Establishment survey, which collects data from a sampling of more than 400,000 businesses across the country, and the Household survey, which is based on a sampling of about 60,000 households. It is the most comprehensive look at the labor market until the annual GDP numbers are released – generally 3 months after the end of a given year.
This month, the headline statistics on unemployment continued their celebratory mood, with the overall unemployment rate falling to a scant 6.1 percent in June, its lowest level since September of 2008. Other headline numbers were also very bullish. At 10.7 percent the unemployment rate for African Americans was below 11 percent for the first time since September 2008, as many as 288,000 new jobs were added to the economy and the number of long-term unemployed declined by 293,000 in June to 3.1 million.
While all of this is positive news, it does not completely reflect the still poor state of the nation’s labor market. The most important aspect that the headline figures do not bring out is that the number of people working in America is still below where it was in 2007, even though the population has grown substantially over 7 years. This is because the labor force participation rate (or the percentage of working age people who actually work) continues to hold at an all-time low – though it was up slightly in June. Much of this may be due to the fact that unemployed people are not starting their own companies at anyway near the rates that they did prior to the recession. As the chart to the right shows, the number of self-employed is down significantly and has been relatively flat for years. Since most job growth comes from small-businesses, and self-employment is a good proxy for small business development, one can easily see why the labor force continues to be stagnant.
The difficult regulatory environment in the US (at both the national and local levels) is likely a reason for this. If it is difficult or impossible to start a business, people simply will not take the risk. Since risk and entrepreneurialism is what drives the economy forward, this may be one of the scariest messages to come out of the jobs report – in spite of the good headline numbers.
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