US labor market sees growth dip

August figures indicate that the US labor market is experiencing weak job growth and a dip in labor participation.

The US Bureau of Labor Statistics (BLS) has released its latest figures showing the rate at which jobs are being added to the US economy. In August this year, 142,000 jobs were added, relative to the monthly average of 212,000 for the previous twelve months. This leaves the unemployment rate at 6.1%, only 0.1% down from July.

In addition, labor force participation slipped to 62.8%, down from 62.9% in July.

Commentators on either side of the political divide in the US have formulated sharply different interpretations of the data.

J. D. Tuccille cited the BLS’ figures, a report from the libertarian Brookings Institution, and a recent paper by scholars John Haltiwanger and Steven Davis, to argue that the figures were caused by too much government regulation. Tuccille refers to decreasing labor market flexibility as a particular cause for concern.

According to the New York Times: “Liberals blame fiscal austerity in Washington and a weak economy that has pushed college students into jobs formerly held by high school graduates, forcing the latter out of the labor market.”

Alexander S. Kritikos offers a straightforward policy recommendation regarding the relationship between entrepreneurs, regulation, economic growth and job creation. He collates evidence to show the hugely positive effects that entrepreneurship can have on economic development. He thus advises policymakers to allow entrepreneurs to operate flexibly and develop their ideas.

He says: “To attract productive entrepreneurs, governments need to cut red tape, streamline regulations, and prepare for the negative effects of layoffs in incumbent firms that fail because of the new competition.” 

Related article:
Entrepreneurs and their impact on jobs and economic growth, by Alexander S. Kritikos