Percentage of Workers Looking For Work, Down - Percentage of People Who Have Given Up Looking For Jobs, Way, Way Up

From the Cato Institute:

If the unemployment rate drops because hundreds of thousands of jobs are being created each month, that’s obviously good news.

But if the jobless rate falls because the government estimates that lots of people have become discouraged and dropped out of the labor force, then that’s not good news.

In other words, sometimes the unemployment rate, by itself, doesn’t tell the full story.

That’s why one of the best statistics to look at is the employment-population ratio, which measures the number of people who have jobs and compares it to the number of people who could have jobs.

And by this measure, the Obama White House can’t be very happy. As illustrated in the chart, the job numbers have barely begun to recover.

This is a woefully under-reported piece of data. A few news outlets do mention the phenomenon of “discouraged workers” dropping out of the labor market, but only policy geeks like me seem to pay attention.

But the employment-population ratio does have real-world implications. The economy’s overall level of output (i.e., national income, gross domestic product, etc) depends on who many people are working. And that is what determines whether living standards are rising, falling, or stagnating.

This is why the Obama Administration can’t rely of a falling unemployment rate. As I’ve explained elsewhere, the American economy appears to have suffered a permanent loss of output in recent years.