Unemployment Rate Drops as More Americans Give Up Looking for Work

by Salary.com Staff - Original publish date: September 10, 2012

The national unemployment rate dipped down to 8.1 percent last month, slightly below July's 8.3 percent and a full point lower than the August 2011 rate of 9.1 percent, according to numbers released last week by the Bureau of Labor Statistics. 

Good news, right? Well…

To count as "unemployed," a person must be looking for work. So when the unemployment number drops, that could mean people have found work or it could mean they have simply stopped trying, discouraged by the challenging job market. 

And it seems that last month those who gave up had at least as much impact on the overall rate as those who found gainful employment. Between August 2011 and last month, the number of people not participating in the labor force grew by 2.7 million, according to the BLS. The labor force participation rate – which includes those with jobs or looking for employment – fell from 64.1 percent to 63.5 percent.

At the same time, employment has gone up over the past year, though not as fast as many would like. The number of employed people rose by 2.3 million between August 2011 and last month, and the country's employers added 96,000 jobs last month. 

Unemployment was lowest among those with college degrees (4.1 percent); veterans of World War II, Korea and Vietnam (5.2 percent); people over 55 (5.9 percent); and white women (6.5 percent). The groups facing the highest jobless rates were black teenagers (37.9 percent); white teenagers (22.8 percent); black men over the age of 20 (14.3 percent); and people without a high school diploma (12 percent).

For those who are out of work, unemployment has proven to be a stubborn problem. As of last month, more than 5 million people – 40 percent of the unemployed – had been out of a job for at least 27 weeks. The average length of unemployment was nearly 40 weeks. 

Another 8 million people are working only part-time because they either couldn't find full-time work or because business has slumped for their employers. 

So is there any good news? There are some glimmers. 

Average weekly earnings for all private-sector employees edged up from $793 to $809 over the past year. 

And the country continues to add jobs at an average rate of 139,000 per month so far this year (though that is down from the 2011 average of 153,00 per month). Employment rose in food services and drinking places, professional and technical services, health care, and the utilities sector.