Despite sunny outlook, job numbers show working population shrinking

Neil Munro White House Correspondent
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New data from the Bureau of Labor Statistics indicate why America’s unemployment rate nudged down to 9.1 percent in July: The number of Americans looking for jobs fell faster than the total number of jobs nationwide.

The overall workforce fell by 193,000 in July, even though the working-age population rose by 182,000 as young people and legal immigrants entered the workforce.

This rapid workforce decline was faster than the loss of jobs, whose total number fell by 38,000 in July.

The national employment-to-population ratio declined to 58.1 percent in July 2011, down from 58.9 percent in July 2010.

BLS data show the private sector created 154,000 jobs in July, while the government sector shrank by 37,000 jobs.

The overall downturn in workforce numbers reduced the percentage of adult Americans in the labor force to 63.9 percent, down from 65.3 percent in July 2010, according to BLS data. That percentage excludes full-time students and people who are incarcerated.

All of the workforce decline was among men, whose participation rate fell to 73.2 percent, down from 73.5 percent in July 2010. The women’s participation rate remained flat at 58 percent.

One reason for the discordant numbers is that the BLS combines two surveys, said Rea Hederman, a research fellow at the Heritage foundation. The figure of 117,000 new jobs comes from a survey of established companies, and the data about workforce participation comes from a smaller survey of households, he said. Usually, the two surveys show complementary data, but this month’s surveys show very different trends, he said.

Both “survey have been pretty pessimistic for the last couple of months … but the establishment survey is saying things aren’t as bad as they were in May and June,” even though the outlook is still negative, he said.

If the household data showing a shrinking population is correct, “a lot of adult men are losing faith … [and] you just had a huge number of men drop out,” he said.

But if the establishment data is correct, then “things aren’t as bad as they were in May and June,” he said. (Meet America’s #1 terrorist: Dow Jones)

The gap between the two surveys will shrink over a few months, he said. But economists can’t tell yet which survey is a more accurate predictor of the next few months, he said. “That is one of the things that everyone is looking for [in the data] next month,” he said.

The establishment survey report of 117,000 jobs likely “represents a blip of firms [who were] anticipating a faster recovery a few months back,” said Aparna Mathur, a resident scholar at the American Enterprise Institute. The more pessimistic household survey “definitely seem to be more in tune” with news reports about business layoffs, declining confidence among consumers, and pessimistic economic forecasts, she said.

“We have to wait and see” which survey is more accurate, she said.

White House officials tried to soften the impact of the report by scheduling a job-related speech by President Barak Obama at Washington’s historic Navy Yard.

Last month the president also used a jobs-related speech to soften the political impact of a painful jobs report.

White House officials are accepting interview requests to talk up the administration’s record and policy preferences. “We were way above expectations … we need to grow our way out of this,” said Austan Goolsbee, the departing White House economic adviser. “We’ve still got a long way to go.”

Most news reports have focused on the BLS’s announcement of 117,000 new jobs, but some Wall Street and Washington observers noted the underlying data about the shrinking workforce.

The “report only tells part of the story, as nearly one in every five Americans are either unemployed, underemployed or have given up looking for work altogether,” according to a statement from Florida Republican Sen. Marco Rubio.

The government should pursue “pro-growth tax and regulatory reform that will help create private sector jobs,” he said. “We have an unemployment emergency in America, and Washington is making it worse.”