Characteristically, Zachary Karabell tries to constructively complicate the story surrounding the new unemployment numbers, but not before making the following observation:

In the past two months, almost every indicator of economic activity has pointed upward. In fact, statistically, the U.S. economy is doing more than OK. Manufacturing surveys show strong expansion; exports are surging; overall output is increasing, and while wages and productivity are stuck in neutral, many areas of the country are seeing robust activity, ranging from Texas and Nebraska to Silicon Valley and the massive Facebook IPO looming.

And yet:

These monthly numbers show that indeed, this may be an economy that is statistically doing well but which isn’t serving the needs of tens of millions citizens. They show that the gap between haves and have-nots continues to yawn wide, especially between educated women with a college degree (for whom there is no employment crisis) and high-school educated minority men who are suffering a jobless situation that is of nearly epidemic proportions. The number of long term unemployed (more tan six months) is stuck at 5.5 million – and that doesn’t count those who have stopped looking for work. Average hourly wages are up 1.9 percent over the past year, which is just enough to cover the increased costs of goods and services overall.

Politically, a complicating factor is that high-school educated minority men are considerably less likely to participate in the electoral process; to the extent that they do, they tend to be aligned with the Democrats. Educated women with a college degree are divided between those who are married, a swing constituency that tilts right, and those who are unmarried, a group that historically tilts to the left. 

Briefly, I’ll note that Karabell finds it sad that “the contesting party will welcome bad news and fear good.” One suspects that much the same was true in, say, 2004, and it was sad then as well.

As Jim Geraghty notes, an extraordinary number of workers dropped out of the labor force last month — 1.2 million:

It is fantastic that the number of Americans working is increasing. But those working Americans are supporting more and more non-working Americans. There are a lot of reasons to leave the labor force, some by choice and generally happy (parenthood, going back to school, affording early retirement) and bad and unhappy ones (despair, unaffordable involuntary early retirement). The number of Americans not in the labor force jumped from 86,001,000 to 88,784,000 with this revision. While they may have been invisible in the previous figures, the bottom line remains the same: a gargantuan number of Americans who could be working aren’t.

A quick look at the civilian employment-population ratio over the last five years illustrates Geraghty’s point rather well. 

One interesting question is whether we will see a surge in labor force participation in the coming months, perhaps as a reflection of growing economic optimism. Though that would tend to increase the unemployment rate, it would in other respects be an encouraging sign.

But if we don’t see such a surge, we might need to consider the extensive margin. That is, has something changed about our tax and transfer policies in recent years to encourage non-participation in the mainstream labor force? This is an argument that Casey Mulligan has been making (somewhat controversially) in the post-crisis years. The following is drawn from the abstract of his December 2011 working paper, “The Expanding Social Safety Net“:

Inflation-adjusted spending on means-tested subsidies have increased sharply since 2007, and most of this growth was due to changes in eligibility rules, and increases in subsidies per eligible person, rather than increases in the number of people who would have been eligible under pre-recession subsidy rules. The non-elderly parts of the safety net have increased from about $10,000 per year of non- or under-employment by non-elderly household heads and spouses in 2007 to almost $15,000 per year in 2010, adjusted for inflation. From 2007 to 2010, inflation-adjusted safety net spending increased $35,000 for every added year of non-employment or under-employment. As a result, the average private returns to employment are substantially less than they were in 2007.

Mulligan elaborates on the potential implications:

All of these safety net expansions help cushion individuals and businesses from reductions in their incomes. A necessary, but presumably unintended, byproduct of means-tested benefits is that they act as a penalty for raising one’s market income: the more someone earns, the more of the “cushion” he has to give back. The penalty reduces the rewards to time and effort that raise market incomes, and thereby causes at least some people to do less toward earning their own market income. As people work fewer hours, and fewer businesses attempt to expand, output will be lower, and output per hour will be greater. As explained in Mulligan (2011b), the effect of an expanding safety net on real hourly wages depends on whether the safety net expands more for individuals than it does for businesses. The magnitude of these effects depends on the amount and characteristics of safety net expansions (the subject of this paper) and the sensitivity of work hours to those expansions.

One assumes that there are other explanations for stagnant employment levels, including many that challenge rather than resonate with conservative intuitions. If Mulligan is right, however, the unemployment rate will look “better” as more people exit the workforce because the private returns to employment have decreased considerably since 2007 as the returns to non-employment and under-employment have increased.