The unemployment dropped a decimal point in today's jobs report, from 7.4 percent last month to 7.3 percent. Good news, right? Well, not so much. The reason the unemployment rate went down was not because people found jobs. It was because they stopped looking for them. In the last month alone, 312,000 people dropped out of the labor force, according to the Bureau of Labor Statistics.
People who aren't looking for a job aren't counted in the headline unemployment figure, and as the AP notes, right now the percentage of people who either have a job or want one—the labor force participation rate—is at 63.2 percent, the lowest its been since 1978.
That weighs heavily on today's numbers. If everyone who dropped out of the workforce had kept looking for a job, the unemployment rate would have risen a decimal point, to 7.5 percent. And the broader decline in labor force participation has also made a big impact on the overall unemployment-rate drops we've seen in the last few years: If the labor force participation rate were the same today as it was before the recession threw a wrench into the economy, the unemployment rate would be in the range of 9.7 percent.
As for actual job creation last month, well, there's not much to get excited about there either. The economy added just 169,000 new jobs last month. That's not nothing, but it's pretty slow going. Ezra Klein points us to The Hamilton Project's page on the "jobs gap"—the number of new jobs the economy has to create in order to both create enough work for new labor force entrants and return the economy to pre-recession levels. The Hamilton Project estimates that the economy needs to create an average of 208,000 jobs each month to get there by 2020. At last month's pace, we won't get there until sometime in 2023.