Labor Situation February 2011 (by MacroStory.com)

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Friday's Non Farm Payroll is being touted as a great report.  The combination of 192,000 jobs added and an unemployment rate of 8.9% that continues to move in the "right" direction. The number is measured as a success because it "beat expectations."  It beat whose expectations?  Did it beat the expectations of those looking for work for months now with no success?  Did it beat the expectations of the 4 applicants who apply for every job and will not get hired?  No one on the mainstream media discusses the "real" or population adjusted number which would be about 32,000 new jobs added.  Then there is the unemployment rate which continues to move downward.  Politicians can show a positive trend as proof their policies are working.  The Fed can show the "success of QE" in a "non-inflationary environment."

The more the data is massaged to instill confidence the more we must realize how desperate those in charge of policy are becoming.  There is no talk about the shrinking civilian workforce. There is no mention of those who are so tired of sending out hundreds of resumes, receiving no inquiries on jobs they are beyond qualified for or the five applicants for every one job available.

The civilian participation rate is a measure of those willing and able to work and who are employed or unemployed as a percentage of the civilian population.  The number continues to drop, but why?  Why since the great recession has the participation rate fallen from 66% to 64%?  The government does not measure disgruntled workers?  If you tire from the lack of jobs and give up you are no longer considered "willing" and therefore no longer unemployed.  The true unemployment rate is far higher than 8.9% but as Jack Nicholson would say "you can't handle the truth."

The chart below is an overlay of the participation rate versus the unemployment rate.  About the time the unemployment rate began to truly rise, the participation rate begins a significant move down.  Just imagine if the participation rate stayed flat as it did through the prior 10 years.  The unemployment rate would be closer to 11% and the severity of the economic problems we face more real and open for an honest discussion.

Submitted by Macro Story.  To read more, please visit - MacroStory.com