The Two Most Important Charts From Today's Jobs Report

This morning’s jobs number came in with a weak gain of 36,000 new jobs. Estimates were for gains of around 146,000.

Yet the unemployment headline rate fell to 9%. How did this happen?

The participation rate continues to fall. This month it fell due to the population control effect, but in previous months it fell because workers decided to no longer look for work. With a declining participation rate, people unemployed in the population become a smaller percentage of the workforce (smaller denominator).

From the St. Louis Fed:


Photo: St. Louis Fed

But more importantly, who are these people dropping out of the workforce? Sure, some of them are probably early retirees, but they’re likely also construction workers who have been unable to find new jobs.

From the height of the housing boom until today, approximately 2.2 million construction employees have lost their jobs, according to St. Louis Fed data.

So the big problem is putting those construction workers back to work, and here’s one place where the Fed admits it is powerless. In October, Bernanke said, “The Fed does not have the means to transform construction workers into manufacturing workers.”

It’s not like the government is spending extra money on training right now, to turn these former home builders into skilled laborers. Nor is it spending on more stimulus that could have these out of work laborers build roads or bridges to nowhere (or more useful things). 

So, until the home-building sector comes back, or these workers find someone to help them retrain, expect them to remain unemployed, dragging down that job growth number.


Photo: St. Louis Fed

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.