Economy Is Recovering But Unemployment Numbers Are Not

By Brenda P. Wenning

NEW YORK ( AdviceIQ) -- Work, or the lack of it, is what the economy is all about. When Americans are working, they spend money. When they spend money, the economy grows. Too bad that the jobless numbers are dropping so very slowly.

If the economy is truly recovering, as many pundits suggest, the unemployment rate should be dropping appreciably. Despite some encouraging indicators, it isn't.

In its recent report, the U.S. Bureau of Labor Statistics announced that during August, nonfarm payroll employment increased by 169,000, bringing the unemployment rate down from 7.4% to 7.3%. That's not a significant change, but it beats the 8.1% rate of a year ago.

In addition, the Institute of Supply Management reported that its manufacturing index edged up to 55.7 from 55.4 in July. While that's also not a significant change, economists had forecast a modest decline. Instead, it was the third straight month of growth, which any reading above 50 indicates. In addition, the new orders index jumped nearly 5%, to 63.2. Reports also showed improvements in manufacturing in China and the eurozone.

Finally, a Bloomberg survey of 94 economists showed that payrolls expanded at a faster pace in August, with an 180,000 gain, than in July, with a 162,000 gain.

On the other hand -- and there always seems to be another hand -- Gallup found that unemployment for the U.S. workforce was 8.7% in August, an increase from 7.8% in July and 8.1% in August 2012. The polling organization uses a different gauge than the BLS.

Gallup also said that the U.S. workforce participation rate in August was 66.4%, a decline from 67.7% in July and down from 68.1% in August 2012. Gallup defines the "workforce" as adults who are working or actively looking for work and available for employment.

Keep in mind there are many ways to measure the unemployment rate. Gallup also measures the U.S. payroll to population employment rate (P2P), which dropped to 43.7% in August from 44.6% in July. It stood at 45.3% in August 2012. The P2P rate estimates the percentage of the U.S. population 18 and older that is employed for at least 30 hours per week.

Last year, the P2P rate improved for 11 out of 12 months. This year, the P2P rate failed in improve in seven out of eight months.

Baby boom retirement accounts for some of the drop in workforce participation, but the Gallup numbers make clear that the economic recovery remains weak at best.

Even if the unemployment rate is trending down, as the BLS numbers show, a drop of 0.1 percentage point is nothing to celebrate. If the economy is improving, it's doing so at a glacial pace.

-- By Brenda P. Wenning, president of Wenning Investments in Newtown, Pa.

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AdviceIQ is a network of financial advisors that writes insightful articles for the public about investing and wealth management. All articles are edited by AdviceIQ's editor in chief, Larry Light. AdviceIQ certifies that all its advisors have no regulatory infractions.