The US Economic Mystery: Why Is Unemployment Falling While Jobs Are Disappearing?

The United States economy recorded a decline in the number of jobs last July, but surprisingly, the general unemployment rate improved. This unusual and seemingly contradictory combination points to a highly worrying economic story developing behind the scenes of the dry numbers, senior economists warn.

The main reason for the paradox, as reported in The Washington Post, is that while the US economy did indeed lose tens of thousands of jobs, American workers abandoned the labor market at an even faster and more dramatic pace.

"Where did all the workers disappear to?"

"This is one of the very few times we see the number of jobs in the country shrinking, but the unemployment rate falling along with it," noted Steven Moore, an American economist. The explanation, according to him, is simple but particularly troubling: far fewer people are bothering to look for work.

The rate of adults who are working or actively looking for work dropped in July to 61.4%, the lowest figure recorded since February 2021, when the United States was at the peak of the global coronavirus pandemic.

According to data from the US Department of Labor, employers cut 23,000 jobs during July, but the unemployment rate fell slightly to 4.1% compared to 4.2% in the previous month. Population aging is one of the main forces leading to a decline in active workers, as the "baby boomer" generation retires in droves, but this demographic figure alone cannot explain the sharp decline in labor force participation among those in their "prime working years" (ages 25 to 54).

Men, in particular, are experiencing a sharp decline in their presence in the labor force, with a participation rate of only 66.8%, an all-time historical low if the pandemic period is excluded. Structural changes play a significant role: most recent employment growth was recorded in healthcare and private education, sectors usually dominated by women. Conversely, industries traditionally dominated by men, such as manufacturing, transportation, and mining, have suffered significant cuts.

"We usually like to see the unemployment rate fall," explains Alexander Bick, a senior economist at the Federal Reserve Bank of St. Louis, "but the big fear now is that desperate workers are simply giving up and stopping their search." This complex picture is also influenced by political factors, including the Trump administration's efforts to seal the country's borders and deport immigrants, steps that have naturally led to a sharp decline in the number of foreign-born workers.

Young people are also leaving

Parallel to these phenomena, American teenagers and young people are abandoning the labor market in droves. The rate of 16 to 19-year-olds in the labor force has dropped to its lowest level since the end of the pandemic. Experts interviewed by The Washington Post point to a significant slowdown in hiring in the hospitality and retail sectors, as well as the growing effects of the artificial intelligence revolution, which creates unprecedented barriers to entry for entry-level jobs.

Self-service checkouts are replacing thousands of cashiers, and technology-based resume screening tools tend to favor workers with prior experience, thereby pushing young people out. Sarah Estep, an economist at a Washington research institute, expressed grave concern that young people are now missing out on critical work experiences.

Despite the series of worrying data, Guy Berger, director of economic research at an institute in Philadelphia, found one bright spot: the number of people declaring that they want to work but have given up looking has fallen slightly. "People are simply not telling us 'I want a job but I can't find one'," concluded Berger.