Mark Lennihan, Associated Press
WASHINGTON — Just how sturdy is the U.S. job market?
That's the key question the Federal Reserve will face when it decides later this month whether to reduce its economic stimulus.
The answer depends on where you look.
The economy has added jobs for 35 straight months. Unemployment has reached a 4½-year low of 7.3 percent. Layoffs are dwindling.
Yet other barometers of the job market point to chronic weakness:
The pace of hiring remains tepid. Job growth is concentrated in lower-paying industries. The economy is 1.9 million jobs shy of its pre-recession level — and that's not counting the additional jobs needed to meet population growth. Nearly 4.3 million people have been unemployed at least six months.
What's more, employers have little incentive to raise pay. Many unhappy employees have nowhere else to go.
Still, when it meets Sept. 17-18, the Fed is expected to reduce its $85 billion a month in bond purchases by perhaps $10 billion. Its purchases have helped keep home-loan and other borrowing rates low to try to encourage consumers and businesses to borrow and spend more.
Here's a look at the job market's vital signs as the Fed's decision nears:
The unemployment rate slid in August to 7.3 percent, its lowest level since December 2008. Unemployment had peaked in October 2009 at 10 percent and has since fallen more or less steadily. Since then, the number of people who say they have jobs has risen by 5.7 million. And the number of those who say they're unemployed has dropped by nearly 4.1 million.
That's the good news behind the tumbling unemployment rate.
But the rate has been falling, in part, for a bad reason: People are dropping out of the labor force. Once people without a job stop looking for one, the government no longer counts them as unemployed.
Some are retiring. Some are young adults who have chosen to go to college rather than brave a tough job market. Some have gone on disability. And some have given up the job search, discouraged by repeated rejections.
The percentage of people either working or looking for work — the so-called labor force participation rate — fell last month to a 35-year low: 63.2 percent. If the participation rate were at the pre-recession level of 66 percent, up to 6.8 million more people could be counted as unemployed. And the unemployment rate could be as high as 11.2 percent.
The 4 million-plus Americans who have been unemployed for six months or more are down from a peak of 6.7 million in April 2010. Yet before 2009, the United States had never seen long-term unemployment surpass 2.9 million, even during the deep recessions of the mid-1970s and early 1980s.
Fed Chairman Ben Bernanke has called long-term unemployment a "national crisis" that's causing workers to lose skills.
Since the Great Recession officially ended in June 2009, the American economy has added nearly 5.6 million jobs. Yet that hasn't been nearly enough to fill the hole left by the recession. The United States still has 1.9 million fewer jobs than the 138 million it had when the recession officially began in December 2007.
If hiring continued at August's 169,000-job monthly pace, the job market wouldn't return to pre-recession levels for almost another year.