As bad as the headline numbers in Friday’s employment report were, they still made the job market look better than it really is.

CNBC.com

The unemployment rate reached its highest point since 1993, and overall employment fell by more than a half million jobs. Yet that was just the beginning. Thanks to the vagaries of the way that the government’s best-known jobs statistics are calculated, they have overlooked many workers who have been deeply affected by the current recession.

The number of people out of the labor force — meaning that they were neither working nor looking for work and that the government did not consider them unemployed — jumped by 637,000 last month, the Labor Department said. The number of part-time workers who said they wanted full-time work — all counted as fully employed — rose by an additional 621,000.

Take these people into account, and the job market may be in its worst condition since the early 1980s. It is still deteriorating rapidly, too.

Already, the share of men older than 20 with jobs was at its lowest point last month since 1983, and very close to the low point of the last 60 years. The share of women with jobs is lower than it was eight years ago, which never happened in previous decades.

Liz Perkins, 24 and the mother of four young children in Colorado Springs, began looking for work in October after she learned that her husband, James, was about to lose his job at a bed-making factory.

But the jobs she found either did not pay enough to cover child care or required her to work overnight. “I can’t do overnight work with four children,” she said. She has since stopped looking for work.

The family has paid its bills by dipping into its savings and borrowing money from relatives. But Ms. Perkins said that unless her husband found a job in the next three months, she feared the family would become homeless.

Even Wall Street economists, whose analysis usually comes shaded in rose, seemed taken aback by the report. Goldman Sachs called the new numbers “horrendous.” Others said “dreadful” and “almost indescribably terrible.” In a note to clients, Morgan Stanley economists wrote, “Quite simply, there was nothing good in this report.” HSBC forecasters said they now expected the Federal Reserve to reduce its benchmark interest rate all the way to zero.

Such language may sound out of step with a jobless rate that, despite its recent rise, remains at 6.7 percent; the rate exceeded 10 percent in the early 1980s. But over the last few decades, the jobless rate has become a significantly less useful measure of the country’s economic health.

That is because far more people than in the past fall into the gray area of the labor market — not having a job and not looking for one, but interested in working. This group includes many former factory workers who have been unable to find new work that pays nearly as well and are unwilling to accept a job that pays much less. Some get by with help from disability payments, while others rely on their spouses’ paychecks.

For much of the last year, the ranks of these labor force dropouts were not changing rapidly, said Thomas Nardone, a Labor Department economist who oversees the collection of the unemployment data. People who had lost their jobs generally began looking for new work. But that changed in November.

source/more: CNBC.com