Many Have Given Up

The news reports unemployment is down to 5.1%, a number consistent with a normally functioning economy. The Associated Press reports:

Average hourly wages for all workers rose 8 cents to $25.09 in August, lifting the annual gain to 2.2 percent in August. That's far below the roughly 3.5 percent yearly gain typical of a strong economy. The sluggish wage growth suggests that employers still see many unemployed workers and don't have to offer higher pay to attract qualified applicants.

Nor have the steady job gains of the past three years encouraged more Americans to re-enter or join the job market. The proportion of Americans either working or looking for work remained at a 38-year low in August.

The major reason unemployment is that low is because record numbers are out of the job market entirely, neither working nor looking for work. Lower unemployment may, however, provide a rationale for the Fed to raise interest rates for the first time in 7 years.