On the surface, the new jobs report, which shows the unemployment rate dropping to 8.6 percent from 9.0 percent the previous month, is good news. Below the surface, however, the news is actually quite disturbing.
According to the Department of Labor, 120,000 jobs were created last month, which is an unusually low figure for what is supposed to be a recovery. But what really stands out about the DOL report is that 315,000 people dropped out of the labor market in November. To put it another way: The number of people dropping out of the labor force in November was more than two-and-a-half times as large as those joining the labor force. In fact, the labor participation rate fell to 64 percent from 64.2 percent in October – nearly matching the lowest figure we’ve seen (63.9 percent in July) since the early 1980s. The long-term unemployed (27 weeks or more) increased as well, even as the average hourly earnings went down. (Wages are up by only 1.8 percent over the past 12 months while overall inflation increased by 3.6 percent.)
What this means is that we’ve got a very weak labor market.
Often a decreasing unemployment rate is a sign of economic strength. In this case it’s a sign of economic weakness. And all the political spin in the world won’t change that.