Today’s small drop in the unemployment rate might be good news, but really only because it could be a lot worse.
First of all, the drop did not come from new job creation — this morning’s report says we lost 11,000 more jobs on net. We’ve gone nearly two years without creating any net jobs. Assuming a growing labor force, even positive job growth is not necessarily enough to sustain employment, so continued job-loss is still bad news.
So why is unemployment down by two-tenths of a percent this month? Because fewer people are now looking for work. The denominator in the unemployment equation — the number of people considered part of the “labor force” — fell by 100,000. Labor force participation in the U.S. is down to 65 percent — its lowest level since early 1986.
