The Entrepreneurial View

The Dismal Jobs Data in July

by Raymond J. Keating

As sometimes happens when U.S. employment data are released, the numbers for July tell two stories. The question: Which story matters?

The story according to the establishment survey payroll numbers is not good. At the same time, though, it’s not horrible. The payroll numbers pointed to employment growth of 163,000. While at least positive, those numbers are far below where they should be during an economic recovery, such as in the neighborhood of 250,000.

The payroll numbers simply reconfirm the continuation of an under-performing recovery.

But the jobs story according to the household survey is far grimmer.

The labor force actually declined by 150,000 in July. That means that the labor force has fallen in three of seven months this year.

It follows that the labor force participation rate is down. The July rate of 63.7 percent looms at three-decade lows. The discouragement of far too many workers persists.

Meanwhile, employment according to the household survey actually dropped by 195,000 in July. Again, employment has dropped in three of this year’s first seven months.

The employment-population ratio also is at near-30-year lows, and the unemployment rate ticked up to 8.3 percent last month.

Which story warrants closer attention? Well, the household survey better captures start up and small business activity, and of course, it is small business activity that matters to the economy now and in the future.

The bottom line is that businesses simply are not creating jobs. Why? They are discouraged by misguided and costly public policies unfortunately in all major policy arenas. Tax, regulatory government spending, trade and monetary policies are pointed in the wrong direction, i.e., in a direction that raises costs; diminishes pro-growth, pro-entrepreneur incentives; and creates enormous uncertainty.

Therefore, no one should be surprised that, in such a policy environment, our economy continues to face big problems. In the end, it’s not about Europe or China, for example, it’s simply about bad, anti-growth U.S. policymaking.

There’s nothing positive to latch on to in the July jobs numbers. Instead, the data only stoke more worries about the state of entrepreneurship and our economy.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.