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Mohamed A. El-Erian Headshot

What August's Jobs Report Tells Us

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Today's data release confirms that job creation remains disappointingly sluggish; and, if Congress continues to bicker and dither, our unemployment problems risk getting even more deeply embedded in the structure of our economy. Indeed, each day that passes without a meaningful policy response means that this national crisis becomes much harder to solve.

Between the estimate for August job creation (96,000) and the revisions to the numbers for June and July, the three month average has now dropped to below 100,000 -- a number that does not even keep up with population growth let alone put a dent in joblessness.

To make things worse, August saw no growth in average earnings. Both hours worked and hourly earnings came in flat.

What about the longer-term indicators?

Too many Americans continue to drop out of the labor force -- 368,000 in August alone. While the result is a lower unemployment rate (8.1%), we should not be misled by this widely-quoted headline number. The labor participation rate continues to fall and, at 63.5%, is at a multi-decade low.

There are other flashing yellow lights signaling the deep rooted nature of this crisis.

Notwithstanding citizens dropping out of the labor force, 5 million Americans were classified in August as "long-term unemployed." Meanwhile, teenage joblessness rose to over 24% -- an alarming level given the risk that out of work youth face in going from being unemployed to being unemployable.

All this calls -- very loudly and persistently -- for a comprehensive policy response out of Washington, D.C. -- along the lines that President Obama proposed to Congress last year. But with both houses so deeply divided and polarized, the best we should expect out of DC is policy activism just out of the Federal Reserve. Unfortunately this is insufficient.

As hard as Ben Bernanke and his Fed colleagues try -- and they have been trying very hard, taking monetary policy ever deeper into unfamiliar/experimental territory -- the institution does not have the proper tools to deal with our unemployment crisis.

The bottom line is a simple one. It should concern us all as citizens and parents. And it is worth repeating over and over again:

If Congress is not careful, these trends will further increase an already-material risk that, for the first time in a very long time, our children's generation may be worse off than that of their parents.