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Inside December Jobs Report, Labor Force Hits 'Stunning New Low'

Unemployed

First Posted: 01/07/11 11:47 AM ET Updated: 05/25/11 07:25 PM ET

After a week of promising signs for an improving economy, the news from Friday's Bureau of Labor Statistics report on the state of jobs in America is bleaker than anticipated.

Although the unemployment rate fell to 9.4 percent from 9.8 percent in December, bringing the total number of officially unemployed Americans to 14.5 million, only 103,000 jobs were added in December according to the Labor Department's BLS report -- a number significantly lower than expected. (The Wall Street Journal reported that many Wall Street analysts were predicting "at or above 200,000" new jobs.)

The news gets worse: less than half of the drop in unemployment rate can be attributed to new job creation -- the other half came from 260,000 Americans who have dropped out of the labor force altogether.

This brings the percentage of Americans who are either employed or actively looking for work down to 64.3 percent, what economist Heidi Shierholz calls "a stunning new low for the recession."

"The overarching story here is that this represents the continued slog of the recovery." Shierholz, of the Washington, D.C.-based Economic Policy Institute, said. "It's the same old bright spots that we've been seeing, we continue to see: temporary help services, health jobs, restaurants and bars -- all up." The report shows some growth in health care and leisure services, with most other industries staying static.

"Hiring is picking up. but I think this report underlies that it's going to be a gradual process," IHS Chief U.S. Economist Nigel Gault said. "Overall it wasn't a bad report." Gault added though, that we really need twice this many jobs added per month, month after month, to see any substantial improvement in the unemployment rate.

In December, hispanic and black Americans continued to be hit hardest by unemployment. "I think this is the lowest employment-to-population ratio we've ever had for Hispanic Americans," economist Dean Baker said, also noting a 2.2 percent raise in the unemployment rate for Hispanic bringing the unemployment percent up to 32.2 (not seasonally adjusted).

For all the economists we spoke to, the drop in the labor force stuck out as the most arresting detail.

"We have now added jobs every single month for a year," Schierholz said. "So you would think that there would be labor force growth, these missing workers starting to come back in. Not only is that not happening, it's actually starting to go in the other direction. There's never been a pool of missing workers this large. It's not clear to me when they'll come back."

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