Declining Jobless rate due to shrinking labor force not good news

The spinners in the media have been rejoicing over a declining unemployment rate (even the small decline reported over the last few months). Unfortunately, a decreasing unemployment rate is not necessarily good news. After all, if everyone dropped out of the work force, the unemployment rate would be zero (-0-)! A decreasing unemployment rate is not good news when it reflects a shrinking labor force--

Jobless rate 7.7%; 146,000 new jobs: "The government revised down job gains for September and October by a total 49,000. September's additions were revised from 148,000 to 132,000 and October's, from 171,000 to 138,000. . . . Meanwhile, the continuing sharp drop in the unemployment rate -- from 8.3% to 7.7% since July -- is surprising and at least partly reflects retiring Baby Boomers, says Chief U.S. Economist Jim O'Sullivan of High Frequency Economics. "What's happening here is the demographics have changed," he says. He says monthly job gains of about 75,000 are likely enough to keep the jobless rate from rising, down from 100,000 to 150,000. A shrinking labor force, however, does not bode well for economic growth because retirees have less spending power."

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