unemployment (Photo credit: Sean MacEntee)

 The August jobs report was distressing for a number of reasons, and one of them was that a fall in the unemployment rate (to 8.1% from 8.3%) was actually a negative thing. This might cause one to wonder, if it's bad for the rate to go up, and it's bad for the rate to go down, and it's arguably bad for the rate to stay the same -- because that would mean there's no improvement -- what could the rate possibly do that would be good? A drop in the jobless rate in this case was negative because it represented the exit of hundreds of thousands of Americans from the workforce. The civilian labor force declined and the labor force participation rate hit a generational low of 63.5%. By another measure, "the employment-population ratio has basically been unchanged, which tells you the share of working population employed hasn't increased, even if the unemployment rate has declined," says Michael Feroli, chief U.S. economist at JPMorgan. That ratio indicates that, when population growth is taken into account, nearly no progress has been made since the downturn. And as our Breakout's Jeff Macke noted in last Friday's piece, "For each one-tenth of one percent improvement in the unemployment rate, 184,000 Americans had to become quitters."
And as Bill Stone, chief investment strategist at PNC Asset Management Group, says, "Workers dropping out of the labor force is certainly not the reason you would like [the rate to go down]." ... Continue to read.

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