In Brutal Job Market, More Than a Million Quit Looking

Some economists also worry that the government is providing a disincentive to work by extending unemployment benefits. It's a Catch-22 in which the government is hoping to help the long-term unemployed that could backfire as people become less interested in finding work the longer they remain idle.

"What's keeping people out of the job market is they're giving extended benefits," says Doug Roberts, chief investment strategist at Channel Capital Research. "A lot of people, especially those who are older, are figuring, 'I'll keep my unemployment benefits for as long as I can get them until I can figure out what to do.'"

Among the few positive notes to come out of the jobs report last week was a decline in what some refer to as the "real" unemployment rate, the calculation that counts all the jobless and not merely those who fit into the government's counting mechanism.

That number—technically referred to as the U-6 figure—actually dropped to 16.1 percent, though Rosenberg generally questions the government data because of a reliance on its "birth-death" model.

And some analysts also say that the stock market, at least, can continue to grow even in the face of such daunting unemployment trends.

BofA-Merrill Lynch Global Research said it is sticking to its projections of 275,000 monthly job gains for the fourth quarter. That estimate comes even though the firm says the monthly figures could turn negative later this summer when the Census hiring stops.

"Recoveries do not move in a straight line and NO, this is not a sign we are about to double-dip," Ethan Harris, BofA-Merrill's head of developed economics research, told clients. "Double-dips happen when there is a policy mistake, which we do not expect."

Morici, for one, takes issue with the notion that public policy is not jeopardizing the jobs market. A harsh critic of the Obama administration, he says the $780 billion stimulus was squandered on projects that don't help sustain industry and manufacturing and thus will not provide lasting economic relief.

"By and large they don't have a grasp of the scope of the problems, and we're not creating that much demand for labor," he says. "They're not putting the stimulus in the right places. This administration is really being run like a Junior Achievement project."

Yet companies, if not their potential workers, could yet benefit and in turn pass savings along to investors.

"It's not going to change," Hastings said of the jobs picture. "Some people believe that it's terribly detrimental (to the stock market) and we don't. Companies can drive earnings growth with less labor."

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