The employment report had many “jumping with joy”. But let us not get too excited with some “good-looking, albeit noisy” monthly numbers. The fact remains that the Fed, by capping NGDP growth at around 4% despite the big drop which occurred in 2008/09, is limiting employment growth. This is very clear from the chart: Matt O´Brien has a sober take:

The labor force fell by 806,000 in April, and most of that was because fewer people entered it to begin with. Reentrants — people who have worked before and just started looking again — plummeted by 417,000. That’s the largest monthly drop, in absolute terms, on record going back to 1967. It’s confounding, because a stronger labor market tends to suck people in, not push them away. Indeed, the labor force had been growing the past six months — up 1.6 million between October and March — before this reversal. The likeliest explanation is that the data got ahead of the trend and that this is just a correction. Still, there was plenty more to be disappointed about. The average work week was unchanged last month. So were average hourly earnings. Both of those are pretty good predictors of future demand — and future hiring — so there’s not much hint of better times ahead. If anything, the economy looks like it will just keep chugging along at its 2 percent pace.

This chart from the CEA indicates that the record level of long term unemployment is not the result of structural factors (things like skill mismatch, for example). Both the long term and short term unemployed enjoy the same characteristics. In this situation, more spending (NGDP) would be very helpful.