The U.S. August Jobs Report

The labor department released their monthly jobs report. Today’s release is a report on the employment situation in August. Payroll jobs rose by 96 thousand jobs, driven by private sector job growth of 103 thousand jobs. The private sector job growth was concentrated in services, particularly professional and business services, education and healthcare services, and leisure and hospitality services.

The unemployment rate fell from 8.3 percent to 8.1 percent. Apparently, most of that was because of a decline in labor force participation.

The information that provides us with the unemployment rate comes not from a payroll survey but rather from a household survey. From this survey, the story is one of relative contractions. The employment level contracted about 120 thousand jobs, while the civilian labor force contracted more, by 368 thousand jobs which drives the unemployment rate down.

An important story from this report is one of significant labor force contraction. Why might this be so? One key reason is that jobs are difficult to find at this time. There are both cyclical and structural factors at work. The cyclical factor is the well documented slowness this recovery has exhibited thus far, which will not change quickly as the household sector’s wealth is down, and consequently the sector is still reducing its debt, a gradual process.

Real Estate is one identifiable structurally unstable sector. The post-bubble residential real estate market will eventually find a new steady-state at a lower level of both sales and prices that imply fewer per capita construction jobs than before. This will require real estate industry workers to find jobs in other sectors. This is another slow process.

Commercial real estate is also moving toward a new, lower steady-state level of per capita square footage because of the internet. Brick and mortar retail establishments are on the decline on a square foot basis due to an ongoing shift to internet based transactions. Relative office space requirements will be declining as well, due to a shift to telecommuting. These dynamics will be ongoing for some time, causing a need for workers who are connected to real estate to retrain or to provide their services to clients in a different industry.

These stories about debt reduction and real estate woes are four years old, but at the moment they are still relevant.

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