Weak jobs report should kill interest rate hike

Or so it seems. The BLS last employment situation summary says that only 38000 jobs were created last month. Unemployment fell to 4.7%, but that is mostly the result of the fall in the participation rate, that is, less people in the labor force (see below).

In other words, unemployment rate is lower not because unemployment decreased (at least not much), but because workers stopped looking for jobs. Since the crisis there has been no recovery in the labor force participation rate, as shown in the figure above. This report is consistent with the slow rate of GDP growth announced last week. The economy is slowing to a halt. The Fed should not hike the rate later this summer, but that's not enough. The US needs less austerity. Urgently.