This isn’t the first time it’s happened this year, but the unemployment rate has dropped, even as employment has declined by 125,000 jobs. Here’s the reason why:
The labor force declined in June (-652,000). Following increases earlier in the year, the labor force participation rate has declined by half a percentage point over the last 2 months.
In the U.S., we measure the employment rate by dividing the number of jobs by the number of job seekers, so when the latter declines, the former increases. In June, 9.5 percent of those “participating in the labor force” lacked jobs. In May, a net 322,000 people dropped out of the labor force.
Another top-line measurement that the White House is sure to play up: Private payrolls were actually up by 83,000 last month. Most of the job losses came from the U.S. Census.