February Unemployment Falls to 8.9%

The Labor Department released crucial unemployment data this Friday, stating that the unemployment rate fell to 8.9% in February. This has been the lowest level for the unemployment rate since April 2009. However, there is a dent to this number, as the labor force participation rate fell to 64.2%.

The labor force participation rate measures how many individuals either have a job or are seeking a job. If someone is not actively seeking a job, then they are removed from the statistic, which can give a pseudo-statistical number for the unemployment level.

A three year look on the unemployment rate vs. the labor force participation rate.
Source: Labor Department and The Wall Street Journal.

More simply, people who are not actively seeking a job are not included in the unemployment rate, which may be a problem due to the fact that it is not an accurate measure of the amount of people who are simply discouraged from searching due to the economy.

For example, if the labor force participation today stood at the same level as before the recession, then the jobless rate would be a disheartening 11.5% this last February, as opposed to the 8.9% released by the labor department. This goes to show that clearly many Americans are simply discouraged from seeking employment--until more of these individuals are added back into the labor force participation equation, we would not be on our way to a full recovery.

Another important statistic is added payrolls per month. 192,000 payrolls were added this February, which may seem like a lot, but is actually far from what the U.S. requires in order to have a strong recovery. Nigel Gault, a chief U.S. economist at IHS Global Insight is quoted in the Wall Street Journal stating: "To get a strong recovery, you'd want to be adding 300,000 payrolls a month. We're clearly a long, long way from that."

However, with all this being said, it is still a good indicator that we are on our way to a full recovery--albeit in a slow and sluggish manner.