March 8, 2013

Unemployment Rate Down, But Labor Participation Rate Still Very Low

Keith Hall

Former Senior Research Fellow
Summary

The Bureau of Labor Statistics today announced that the U.S. economy added 236,000 jobs in the month of February, a substantial gain over the 119,000 jobs added in January and enough to lower the unemployment rate to 7.7 percent.

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The Bureau of Labor Statistics today announced that the U.S. economy added 236,000 jobs in the month of February, a substantial gain over the 119,000 jobs added in January and enough to lower the unemployment rate to 7.7 percent. 

However, Mercatus Center senior research fellow Keith Hall – a former BLS commissioner—said that seasonal adjustments could account for much of the upswing and cautioned that the labor force participation rate is still very low.

“This year so far, the average gain of 178,000 jobs per month is in line with the monthly average of 183,000 jobs in 2012. The unemployment rate also ticked down to 7.7 percent in February after hovering around 7.8 percent over the past six months.  Part of the decline was a small drop in labor force participation, which remains very low at 63.5 percent.”

“Seasonal adjustments may have played a big part in the changing levels of job creation over the past two months. In January, the expectation was that the end of the holiday season would see about 3 million people lose work. BLS found a loss of about 2.9 million jobs instead. 

“In February, the expectation was that about 723,000 of the lost jobs from January would be regained.  BLS found that 959,000 new jobs were created, so the ‘seasonally adjusted’ job growth was the reported 236,000.”

“For season factors this large, it is hard for BLS to make this seasonal adjustment. It appears that the seasonal factor for January may have been too large, causing an under-estimation of job growth in January and then an over-estimation for February.”