Upon closer scrutiny though, there is another factor contributing to the drop that is not necessarily good news: The official size of the U.S. labor force is shrinking.
The Bureau of Labor Statistics publishes the “Labor Force Participation Rate” each month, along with a litany of other metrics that are used to give us the headline jobs number and the unemployment rate.
The government's definition of the labor force is all individuals 16 years of age and older, who are employed or seeking employment. It does not include students; retirees; anyone with unreported income, or "discouraged" workers.
The participation rate is the comparison of the "labor force," those looking for work or employed, and everyone else. That ratio is currently 64.2 percent seasonally adjusted, and 63.9 percent non-seasonally adjusted, the same level as last month. Both of those percentages are currently running at 27-year lows, meaning the percentage of Americans not working or even trying to join the work force is at a near three-decade high.
The last time the participation rate was above 66 percent — the 10-year average — was in August 2008.
And he's right. The reason the unemployment rate had dropped 1.1% in 3 months is pretty simple: a couple million Americans went from "unemployed" to "no longer attached to the labor force".
In other words, millions of unemployed Americans are now classified as "no longer looking for work" so they don't count in the unemployment rate. At the traditional average of 66% labor force participation, the unemployment rate in this country would be over 11%, folks.
We're still deep in the heart of this recession. It's just that several million people are no longer playing the game.
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