MUNCIE, Ind. (Sept. 6, 2013) — Ball State University economist Michael Hicks says the August employment situation summary contains the worst economic news this year despite 169,000 new jobs being added.
“First, the estimates from the previous month was revised downwards by 40 percent, with the economy having seen 60,000 fewer jobs in July than previously reported,” Hicks said. “Earlier months were revised by more than 10,000 jobs. But, it is the August numbers which are downright scary.”
The U.S. Labor Department announced today that U.S. employers added 169,000 jobs last month. The unemployment rate fell to 7.3 percent from 7.4 percent the previous month. Economists had been expecting job expansion of about 170,000 to 200,000.
“While the top line data report of 169,000 new jobs sounds rosy the composition of new jobs is horrible,” says Hicks, director of the Center for Business and Economic Research (CBER) at Ball State. “All the new net job growth led by agricultural workers, which is a distinctly seasonal boost. Non-agricultural workers saw jobs plummet by 218,000, but even that is a mirage.
“Government jobs grew by 324,000. So, non-agricultural private sector employment actually declined by 542,000 jobs, but there is still more bad news, since part time employment for economic reasons grew by 156,000. So, in August, we lost 542,000 private sector, non-farm jobs, and another 156,000 turned from full to part time due to weaker economic conditions. This is a white-knuckle loss of employment opportunities for one month.
“We have to face the fact that the economy is growing slowly, while businesses shed workers at an astonishing rate. If the government and farm sectors had not added jobs, many economists would now be predicting a new recession. We should be creating more than 400,000 permanent private sectors jobs per month to ease out of this slump. Instead we just lost more than a half million.”
Hicks said the job numbers clearly suggests the Federal Reserve will face less pressure to slow quantitative easing.