The Bureau of Labor Statistics (BLS) released the Employment Situation report for August today. Nonfarm payroll employment extended its troublingly lackluster streak adding a meager 96 thousand jobs, down from a revised 141 thousand last month. The private sector added 103 thousand while the government sector shed another 7 thousand. Figures for the prior two months were revised downward by a total of 41 thousand.
Despite this weak performance in payroll employment the unemployment rate moved down to 8.1 percent from 8.3 in July. This would be positive news except that it happened for the wrong reason: a shrinking labor force. According to the household survey, the number of persons employed actually declined by 119 thousand. But the unemployment rate declined because an equal number plus an additional 250 thousand workers, previously counted as unemployed, left the labor force. This is the third time this year that the unemployment rate declined while the number of employed persons declined, but the labor force shrank faster. A shrinking labor force is the wrong way to bring the unemployment rate down.