Hours Worked in U.S. Economy Shrank in July

Despite the headline decline in the unemployment rate from 7.6 percent to 7.4 percent, July’s unemployment numbers were bad news for the economy.  This means that the Fed might reconsider tapering off its monetary accommodation.  But the Fed cannot go it alone.  Congress and the President have to consider how to put in place additional pro-growth policies.  Two suggestions: lower America’s corporate tax rate to average OECD levels of 24 percent from our current 35 percent rate, and hold off on additional EPA regulation.

The economy created 162,000 jobs, but the amount of hours worked in the economy decreased by a tenth of a percent.  The average workweek shrank, and average earnings declined by two cents.  Job gains for May and June were revised down by a total of 26,000.

The unemployment rate fell because fewer Americans were participating in the labor force.  The labor force participation rate declined to 63.4 percent from 63.5 percent, and the labor force declined by 37,000.  Accounting for population growth, another 240,000 Americans were counted as out of the labor force. The number of Americans working part-time rose by 103,000.

With the exception of 36,000 new jobs in professional and business services, most jobs were created in industries that paid below average wages, such as retail trade (47,000), food services and drinking places (38,000).  Only 6,000 new jobs were created in manufacturing.

Bottom line: the sluggish economy, with an annualized GDP growth rate of 1.7 percent, cannot be counted on to create the jobs that Americans need to escape unemployment. Fundamental changes are needed.