What Job Growth? Labor Participation Hits 30-Year Low

Job GrowthFinally, some good news for the U.S. economy?

Last week, the U.S. Bureau of Labor Statistics reported 248,000 jobs were created in the U.S. economy in September, pushing the unemployment rate down to 5.9% from 6.1% the previous month. (Source: Bureau of Labor Statistics, October 3, 2014.)

The September jobs market report showed good job creation in sectors like professional and business services, information, mining, construction, and financial. Combined, these six sectors saw job growth of 130,000 jobs, just over half of all jobs created in the month. This is a fresh and welcome change over the past few years where we saw massive growth in low-wage-paying sectors like retail and food services.

While the news from this month’s jobs market sounds good on the surface, the reality is that there’s a severe problem with the employment situation in this country.

Long-term readers of Profit Confidential know I focus on the underemployment rate because it includes people in the jobs market who have given up looking for work and those with part-time jobs who can’t get full-time jobs. Look at that number (what I call the real unemployment rate) and you’ll see it still sits stubbornly around 12%…like it has for the past five years.

And the only boom I can find in the jobs market today is in part-time work! There are now 7.1 million Americans who are working part-time in the U.S. economy.

But the most troubling problem with the jobs market has to do with people who are leaving the jobs market.

In September, the labor force participation rate stood at 62.7%. This means that only 62.7% of individuals in the U.S. economy who are able to work are active in the jobs market. This rate is the lowest it has been in about thirty years.

Going forward, I worry about the U.S. jobs market because, lacking revenue growth, I believe corporate America will resort to massive employee cuts in 2015 to maintain income growth.

Over the past few quarters, we have seen public companies register menial revenue growth, but better corporate earnings…often achieved by cuts to their labor force. The lowest labor force participation rate in three decades confirms this concern.