The not-so-terrific side to today's jobs report

Sure, it's good that the U.S. unemployment rate fell another notch in March, to 8.8 percent, but it's not good that size of the labor force is so small. Just 64.2 percent of American workers are either in the work force or looking for a job, the lowest labor participation rate in a quarter-century (and unchanged from the previous month). Some of the drop is due to more people retiring in recent years. But the other big factor is that more people have given up looking for work. With the economy improving, the question is whether those folks will be re-entering the job market? "Our sense is that with employment trending the way it is, they will," writes Bank of America Merrill Lynch economist Ethan Harris (via Real Time Economics). "This implies that the relentless decline in labor force participation (LFP) is at an end." Of course, even if that happens - and not everyone thinks it will - the result will be a slowdown in the unemployment rate declines we've seen the last few months. Many economists still expect the national jobless rate to be above 8 percent by the 2012 elections - very high to elect an incumbent president.

NYT columnist Dave Leonhardt isn't all that impressed with the March numbers:

Wages did not grow at all in March and have trailed inflation over the last year. The workweek didn't get any longer; it typically does get longer before a big boom in hiring. And an employment increase of 216,000 is not exactly blistering. At that pace, the unemployment rate would not return to 5 percent for about five more years. The economy is making progress, but the progress is slow and uncertain.