The Labor Department reported that the economy created just 38,000 new jobs in May, the weakest job growth since September of 2010, when it lost 52,000 jobs. In addition, the jobs numbers for the prior two months were revised down by 59,000, bringing the average for the last three months to just 116,000.
The household survey showed a drop of 0.3 percentage points in the unemployment rate, but this is not especially good news. The decline was almost entirely due to people leaving the labor force. The employment-to-population ratio [EPOP] was unchanged at 59.7 percent, 0.2 percentage points below the peak for the recovery.
The drop in EPOPs is especially disturbing since it is among prime-age workers and it is for both women and men. The EPOP for prime age workers is still 2.5 percentage points below its pre-recession peak and 4.0 percentage points below the peaks reached in 2000. While many analysts have tried to explain this drop as a supply side story, it seems implausible that a very slight downward trend for men would happen to sharply accelerate in 2001, just as the upward trend for prime age women reverses to a downward trend, due to supply side factors. The only plausible explanation is that the demand for labor has weakened sharply.
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