U.S. Unemployment Rate Falls To 7.3%

For the second month in a row, the Labor Department is reporting a drop in the unemployment rate. The unemployment rate for August has dropped to 7.3% (from 7.4% in July). This is the lowest rate since before the Great Recession began. The economy created 169,000 jobs during the month of August, and the number of people counted as unemployed by the government dropped by 198,000.

I would love to celebrate this as signifying a better economy, but that wouldn't be honest. A clue can be garnered by noting that the drop in the number of unemployed people (198,000) was greater than the number of jobs created (169,000). In addition, the number of employed Americans also dropped (from 144,285,000 in July to 144,170,000 in August -- a drop of about 115,000 workers). So, if the number of unemployed dropped more than the number of new jobs, and the number of employed people also dropped, then what caused the unemployment rate to drop another 0.1% in August.

There can only be one answer -- a significant increase in the number of unemployed people who have given up hope of finding a job, and these people are no longer being counted by the government as unemployed (or even as "marginally-attached" to the workforce). In other words, the drop in the number of employed workers tells us that the economy is not improving, and the drop in the unemployment rate tells us that many more people have given up hope of finding a job in this still struggling economy.

Here is the demographic breakdown of the official unemployment (with last month's rate being in parentheses):
Adult men...............7.1% (7.0%)
Adult women...............6.3% (6.5%)
Teenagers...............22.7% (23.7%)
Whites...............6.4% (6.6%)
Blacks...............13.0% (12.6%)
Hispanics...............9.3% (9.4%)
Asians...............5.1% (5.7%)
Less than high school grad...............11.3% (11.0%)
High school graduate...............7.6% (7.6%)
Some college...............6.1% (6.0%)
Bachelor's degree & higher...............3.5% (3.8%)

And here are the relevant numbers for August:

Size of the civilian workforce:

155,486,000

Official number of unemployed people:

11,316,000

Official unemployment rate:

7.3%

Marginally-attached to the workforce (not counted officially as unemployed because they haven't looked for work in last four weeks):

2,342,000

Officially unemployed + marginally-attached (probably significantly undercounted):

13,658,000

Unemployment rate for officially unemployed + marginally-attached:

8.78%

Number of underemployed (working part-time because they can't find full-time work):

7,911,000

Number of unemployed/underemployed people:

21,569,000

Unemployed/underemployed rate:

13.87%