The economy added 162,000 jobs in July 2013 according to the BLS survey of business establishments

While below expectations, it was enough to bring the unemployment rate down to 7.4% — the lowest jobless rate since December 2008. But this July 2013 unemployment rate reduction is deceptive. It was made possible only because many job seekers were too discouraged to even look for work. When they stop looking they are no longer counted as part of the labor force, and therefore no longer counted as unemployed. The U.S. labor force shrank by 35,000 in July 2013; the labor force participation rate declined from 63.5% to 63.4%. As to who among us is the most discouraged, consider that the labor force participation rate for foreign-born workers (66.9%) remained well above that of native-born workers (63.4%) in July 2013. Since January 2009, foreign-born employment increased by 1.907 million, or by 8.81% while the native-born employment rose by only 157,000 or by 0.13%. While foreign-born workers held 16.3% of all jobs in July 2013, they accounted for 92.3% of total job growth since Obama took office. Over the last 12 months, the labor force participation rate – a measure of worker confidence – declined for the native-born while staying constant for immigrants. At 66.9%, the immigrant participation rate was 3.5% points above the native rate. Note that the gap between immigrant and native-born unemployment rates has profound macroeconomic implications. The Fed says that it will end its monetary stimulus program when the unemployment rate falls below 7.0%. Immigrant unemployment is already below that level — it was 6.7% in July 2013 — and with native-born workers leaving the job hunt, perhaps because they are discouraged by immigrant competition, their jobless rate could also drop below the threshold set by the central bank. This raises a troubling prospect: the Fed declaring victory while native-born workers are still struggling.