Why no one is celebrating an unemployment-rate drop

Labor force participation dropped from 63.9 to 63.8 percent last month. (Mark Lennihan - AP)

Usually, a decrease in the unemployment rate is something to celebrate: We like to see the figure, which measures the percentage of Americans looking for work but can’t find it, to go down. And in this morning’s jobs numbers, that’s what we saw: The unemployment rate dropped to 8.2 percent, its lowest point in three years.

But even so, you won’t hear a lot of champagne corks popping across Washington this morning. Most economic observers were focused on a different number: 120,000. That’s the number of jobs that the economy added in March. It was well below both the 205,000 that analysts expected to see and the 240,000 jobs that the economy added in February.

So, how does the unemployment rate decrease when we’re adding fewer jobs? And how can its decrease be a bad thing? It mostly has to do with how the unemployment rate gets calculated. The unemployment rate represents the percent of Americans actively seeking work who cannot find it. It does not include data on Americans who have stopped looking for work, essentially dropping out of the labor force.

Last month, the ranks of that latter group grew. Participation in the labor force ticked down slightly from 63.9 percent in February to 63.8 percent in March. It’s not a huge shift, to be sure, but also not the direction that economists had hoped to see the economy moving in. The labor force has 164,000 fewer people in it at the end of March than it did when the month began. The number of long-term unemployed — those without jobs for more than 27 weeks — sat unchanged, at 5.3 million, another sign that’s less than encouraging.

One silver lining: The Bureau of Labor Statistics has revised its jobs numbers for February upward, estimating that 240,000 jobs were created that month - 13,000 more than we initiailly thought. Upward revisions have become relatively frequent as of late, and could suggest that today’s jobs data may not be as disappointing after a revision next month.