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TheStreet Open House

Jobs Outlook Grim

NEW YORK ( TheStreet) -- Friday, forecasters expect the Labor Department to report the economy added 125,000 jobs in August -- a monthly pace far too slow to return the nation to full employment.

Most analysts see the unemployment rate steady at 8.3%, while a few see an increase. The wildcard is the number of adults actually working or seeking jobs -- the measure of the labor force used to calculate the unemployment rate.

Adding adults on the sidelines, who say they would reenter the labor market if conditions improved and part-time workers, who would prefer full-time positions, the unemployment rate becomes 15%.

The increased number of adults who have quit looking for work and left the labor force altogether are responsible for 100% of the reduction in the unemployment rate since October 2009 when it peaked at 10%.

If the adult participation rate were the same today as when President Obama took office unemployment would be 11%.

Many adults have reason to be discouraged -- new jobs pay lower wages than did those lost during the recession and job openings remain scarce.

New policies favoring bank consolidation limit access to credit for small and medium-sized businesses and government health insurance mandates drive up the hiring costs. Together, those significantly discourage jobs creation in manufacturing and many service activities.

In the second quarter, the economy expanded at an anemic 1.7% annual pace and added only 127,000 jobs per month, as pessimism curbed consumer spending and the huge trade deficit continues to pull down demand for U.S. goods and services.

Longer term, the economy must grow 3% annually to keep unemployment steady, because advances in technology permit labor productivity to increase 2% each year and population growth pushes up the labor force about 1%.

The economy must add 13.3 million jobs over the next three years -- 370,000 jobs each month -- to bring unemployment down to 6%. To accomplish that, GDP would have to increase at a 4% to 5% pace. That would be possible after a long deep recession but for chronically weak demand for U.S. made goods and services.

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