May 7, 2012

Latest Jobs Report Shows U.S. Economy Is Barely Treading Water

Keith Hall

Former Senior Research Fellow
Summary

The most significant news from Friday's report was the continued fall in labor force participation. Due to this disengagement, the slight drop in the unemployment rate from 8.3 percent to 8.2 percent was actually a false signal. It was more bad news rather than good. To understand this, you need to first understand how the unemployment rate is calculated.

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This excerpt was originally published in US News and World Report. Read the full text here.

Friday's jobs report from the Bureau of Labor Statistics was the first major release of economic data for the second quarter of this year.

Payroll job growth essentially stalled in April, falling to just 115,000 new jobs for the month. This is the second straight month of slowing job growth. With a rate that is slightly below what is required to keep up with population growth, the economy  is now "treading water" at best.

The most significant news from Friday's report was the continued fall in labor force participation. Due to this disengagement,  the slight drop in the unemployment rate from 8.3 percent to 8.2 percent was actually a false signal.  It was more bad news rather than good. To understand this, you need to first understand how the unemployment rate is calculated.