Santelli: 'Good' Jobs Report Has Dark Side

I remember all too well my refrain in the fall of 2008: "It’s all about JOBS, JOBS, JOBS!"

We created 192,000 headline jobs in the February employment report. It’s not enough, but it certainly is welcome news and it is heading in the right direction — although too slowly.

We also learned from the February report that the unemployment rate finally trended below the psychologically important 9 percent mark. This is a very big development, considering the rate was pushing the 10 percent level several months ago.

Upon closer scrutiny though, there is another factor contributing to the drop that is not necessarily good news: The official size of the U.S. labor force is shrinking.

The Bureau of Labor Statistics publishes the “Labor Force Participation Rate” each month, along with a litany of other metrics that are used to give us the headline jobs number and the unemployment rate.

The government's definition of the labor force is all individuals 16 years of age and older, who are employed or seeking employment. It does not include students; retirees; anyone with unreported income, or "discouraged" workers.

The participation rate is the comparison of the "labor force," those looking for work or employed, and everyone else. That ratio is currently 64.2 percent seasonally adjusted, and 63.9 percent non-seasonally adjusted, the same level as last month. Both of those percentages are currently running at 27-year lows, meaning the percentage of Americans not working or even trying to join the work force is at a near three-decade high.

The last time the participation rate was above 66 percent — the 10-year average — was in August 2008.

It is imperative that we continue to monitor this relationship in order to determine if an improving unemployment rate means that American workers are finding jobs, or have just given up looking.