U.S. Labor Participation Rate at Lowest Level Since the 1970s

U.S. Labor Participation Rate at Lowest Level Since the 1970s
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Former Editorial Director at Entrepreneur Media
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The percentage of Americans working is at the lowest rate since the Carter Administration, as new data showed a continuing weak jobs picture for the country.

The Bureau of Labor Statistics said Friday the economy added just 169,000 jobs in August, well short of the 180,000 economists expected.

The unemployment rate fell to 7.3 percent from 7.4 percent but, as was the case last month, that was more of a function of more people leaving the workforce than an actual easing of joblessness. The Labor Department said 312,000 people dropped out of the workforce, meaning they were no longer actively looking for employment.

In fact, the labor-force participation rate, which tracks the percentage of working-age Americans who are actually employed or looking, fell to 63.2 percent in August. The country hasn't seen that few eligible people actually working since August 1978.

Related: Private-Sector Hiring Slows in August; Medium-Sized Businesses Drive New Payrolls

Such a move has had economists worried that there are growing structural problems with employment in America. A widening of jobless-support programs has allowed people to stay out of work longer, and some have suggested that an increase in disability claims reflects a body of workers who will stay on government support rather than seek private employment.

Also, there is evidence that it will be more difficult for people who are out of work for more than six months – likely the lion's share of those who have dropped out of the workforce over the past months, to even get a new job.

There was an unusually large revision of past months, taking what had been a more sanguine picture of employment and making it look a bit more dire. For instance, July payrolls were slashed to just 104,000 from 162,000.

Job owners, particularly small businesses, have shown some hesitancy in hiring. A Gallup poll found this summer that 41 percent of small businesses had frozen hiring because of concerns over the Affordable Care Act. The latest reading from the National Federation of Independent Business' Optimism Index found just 9 percent of its members survey had added employees, while 12 percent reduced employment.

Related: When the Axe Swings, Your Worst Employees Will Outperform

For those holding a job, there was mixed news. On the one hand, the BLS said average hourly earnings rose 0.2 percent to $24.05 in August from July. That figure is up 2.2 percent year-over-year.

But the average work week rose to 34.5 hours from 34.4 hours. This suggests that employers are compensating their employees for doing more work rather than hiring new workers.

Related: Why Everyone Will Have to Become an Entrepreneur (Infographic)

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