It’s the headline that a President facing re-election with a dismal economic record didn’t want to see:
1.2 million people driven out of the workforce in a single month!
A frantic White House exploded into damage-control mode, as a deeply shaken President Obama retreated into his chambers. Nervous spokesmen fanned across the airwaves to stammer apologies, search for silver linings among the storm clouds, offer campaign boilerplate about “hope and change,” and desperately search for some way to blame George Bush for an absolute unemployment disaster that occurred over three years after he left office…
What’s that, you say? You didn’t see that headline? Well, of course not, silly. All you’re seeing in the headlines is good news, because the official, heavily-massaged U-3 unemployment rate fell to 8.3 percent. Fewer people in the workforce means the percentage of unemployed people in the workforce drops.
ZeroHedge is incredulous:
A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by an unprecedented record 1.2 million.
No, that’s not a typo: 1.2 million people dropped out of the labor force in one month! So as the labor force increased from 153.9 million to 154.4 million, the non institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million. Which means that the civilian labor force tumbled to a fresh 30 year low of 63.7% as the BLS is seriously planning on eliminating nearly half of the available labor pool from the unemployment calculation.
As for the quality of jobs, as withholding taxes roll over Year over year, it can only mean that the US is replacing high paying FIRE jobs with low paying construction and manufacturing. So much for the improvement.
Now, I suspect that while a lot of people dropped out of the workforce last month, part of what we’re seeing here is some numerical mutation that caused an abnormally large chunk of the labor-force reduction from the past year to be piled into a single month. There was some decent overall job creation in January, with about 243,000 jobs added to non-farm payrolls, and a nice 50,000 job bump in the manufacturing sector. That total is good enough to modestly outpace current population growth. With the usual backwards adjustment to previous months, it looks like the final quarter of 2011 pretty much kept pace with population growth.
However, the fact remains that even as we get back to the (dismal) 8.3 percent U-3 unemployment we last saw in February 2009, the work force is about half a million people smaller in absolute numbers, and that doesn’t include the increase in the working-age population over the past two years. Throw them in, and you’re looking at roughly 1.5 million jobs completely vaporized, to the point where they don’t even count in the official, widely-reported unemployment statistics.
Famed economist Dr. John Lott comments:
A 1.2 million drop out of the labor force is the record for any one month. And 500,000 a month dropping out of the workforce because they are just giving up because there jobs just aren’t out there. This is something we have not seen before. People just start giving up.