I wanted to add a note of caution to John Steele Gordon’s post regarding today’s Bureau of Labor Statistics report on the unemployment rate.

It’s certainly true there’s good news in the report. But if you examine the internal data, there are also grounds for concern.

To be specific: the labor-force participation number fell to 63.7 percent, the lowest (seasonably-adjusted) figure since May 1983. If the economy were stronger, an increase of 250,000 jobs would actually move the unemployment rate up a bit, as people who had given up looking for work would once again start (meaning they would be counted as part of the labor force again). But what appears to have happened in January is the number of people being hired increased by less than a quarter-of-a-million while the number of people who dropped out of the labor force was around 1.2 million, a record figure. (For more, see here.)

Consider this: If the labor-force participation rate in January 2011 (64.2 percent) was the participation rate in January 2012 (63.7 percent), the unemployment rate would be 8.9 percent instead of 8.3 percent (see this piece by Matt McDonald for more). And if the same number of people were looking for work today as in 2007, unemployment would be right around 11 percent.

In addition, as Tyler Durden points out, in January, the number of part-time workers rose by nearly 700,000 (from 27,040,000  to 27,739,000) while the number of full-time jobs increased by only 80,000 (from 113,765 to 113,845).

These are not good signs. And when you combine this jobs report with the new CBO report (which predicts unemployment will reach 8.8 percent in the fall), the news that last year we experienced the worst sales year on record for housing, and the news that real GDP in 2011 increased only 1.7 percent (down from 3.0 percent in 2010), I’m not terribly encouraged.

Gaining jobs is better than losing jobs, but our economy remains in a very weak condition.

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