The employment and unemployment statistics released this morning by the Bureau of Labor Statistics report an expansion in employment of almost 250,000 and a decline in the unemployment rate to 8.3%. Taking these numbers at face value, the media is already editorializing that the economy is bouncing back. Yet if we look more closely at the numbers we find that they are strongly influenced by the approach the BLS takes to seasonally adjusting data. January is a tricky month for statisticians. December often sees a run-up in the labor market followed by a drop in January. What the BLS is reporting is not an increase in employment, but a drop smaller than expected for this season.

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The Bureau of Labor Statistics recently released the jobs/unemployment report for the month of December, 2011. The report shows an increase in the number of non-farm jobs of an additional 200,000 in December. The number of unemployed persons is 13.1 million, which gives an overall unemployment rate of 8.5 percent. This is a small improvement from the (revised) November unemployment rate, which was 8.7 percent. And that in turn was an improvement over the previous month’s rate of 8.9 percent. So, things are slowly getting better. But, we need to ask at least three questions to make sense of these and related numbers:

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I woke up this morning, turned on my computer and saw the headline: “Unemployment rate falls from 9% to 8.6%.” I thought, “Wow! – the economy added over 600,000 jobs.” After all the total US labor force is a bit larger than 150 million so every 0.1% of that is 150,000 jobs. Thus an improvement of 0.4% in unemployment rate would represent at least 600,000 jobs.

I looked again – oops, no, the economy didn’t create 600,000 jobs in November. At best it only created about 120,000 jobs. So why did the unemployment rate decline by 0.4%? The most striking number in today’s BLS Employment Situation Report is the number of people who dropped out of the labor force between October and November: more than 300,000. In fact, we have fewer people at work than we did 5 years ago – 6 million fewer jobs than in Nov of 2006. We are half way through our own lost decade. The reality is that our job creation numbers need to be, at a minimum, double those that we saw today to significantly eat into the nearly 14 million unemployed and the more than 8 million underemployed.

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The two comments counterposed below capture the current job, or rather jobless, recovery.

The most important point is that we are in a (weak) upswing in the economic cycle and yet are not creating any work for the 25 million underemployed and underemployed. The crucial statistic, the civilian labor force participation rate remained at 62.2 percent in October. The growth in jobs does not match the number of high school graduates and others just entering the job market.

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