The unemployment rate dropped to 7.3%, but that's not good news:
Unemployment Rate Drops for Wrong Reasons, by Phil Izzo, NY Times: The U.S. unemployment rate dropped 0.1 percentage point to 7.3% in August and a broader measure of unemployment fell to 13.7% from 14%, but the declines came from the wrong reasons. The drop in the main unemployment rate was driven almost totally by negative factors. The number of people employed fell by about 115,000. The only reason the rate declined is that the overall labor force dropped by a larger 312,000, a possible sign of discouraged long-term jobless dropping out. The labor force participation rate, which is the percent of the population either working or looking to work, took a tumble to 63.2% — its lowest level since 1978….
More than four million people have been out of work for more than six months and over 11.5 million in total are looking for work. There’s still a big hole in the jobs market.
And the "big hole in the jobs market" is, for the most part, being ignored by fiscal policymakers in Congress as they continue their Years of Tragic Waste.
And Mark Thoma: Economist's View: Paul Krugman: Years of Tragic Waste:
After saying this less than a week ago (see here too):
I just can't understand why so many people are letting fiscal policymakers off the hook. It's not for lack of time or space -- a considerable amount is written daily about the Fed. We ought to be skewering both politicians and economists who are standing in the way of fiscal policy measures, infrastructure in particular, that could strengthen the economy and put people back to work -- both theory and the empirical evidence are clear on this point -- but instead it's mostly silence…. Yes. it's politically unlikely that a fiscal policy package could get through Congress, but that doesn't mean we should give up our role in educating the public about just how terrible the performance of fiscal policy has been. And if we speak out, perhaps it could even matter at the margin…
It's nice to see this from Paul Krugman:
Years of Tragic Waste, by Paul Krugman, Commentary, NY Times: In a few days, we’ll reach the fifth anniversary of the fall of Lehman Brothers — the moment when a recession, which was bad enough, turned into something much scarier. Suddenly, we were looking at the real possibility of economic catastrophe.
And the catastrophe came.
Wait, you say, what catastrophe? Weren’t people warning about a second Great Depression? And that didn’t happen, did it?… The important thing, however, is to realize that… you can have an immense failure of economic policy that falls short of producing total collapse. And the failure of policy these past five years has, in fact, been immense…. Set aside the politics for a moment, and ask what the past five years would have looked like if the U.S. government had actually been able and willing to do what textbook macroeconomics says it should have done…. I’ve done a back-of-the-envelope calculation…. It would have been about three times as big as the stimulus we actually got, and would have been much more focused on spending rather than tax cuts. Would such a policy have worked? All the evidence of the past five years says yes…. Government spending on job creation would, indeed, have created jobs.
But wouldn’t the kind of spending program I’m suggesting have meant more debt? Yes…. But… the ratio of debt to G.D.P…. would have been only a few points higher. Does anyone seriously think that this difference would have provoked a fiscal crisis? And, on the other side of the ledger, we would be a richer nation, with a brighter future….
Look, I know that as a political matter an adequate job-creation program was never a real possibility. And it’s not just the politicians who fell short: Many economists, instead of pointing the way toward a solution of the jobs crisis, became part of the problem, fueling exaggerated fears of inflation and debt.
Still, I think it’s important to realize how badly policy failed and continues to fail. Right now, Washington seems divided between Republicans who denounce any kind of government action — who insist that all the policies and programs that mitigated the crisis actually made it worse — and Obama loyalists who insist that they did a great job because the world didn’t totally melt down.
Obviously, the Obama people are less wrong than the Republicans. But, by any objective standard, U.S. economic policy since Lehman has been an astonishing, horrifying failure.