The unemployment rate dropped this month, and everything is terrible.

When the Labor Department released its always highly-anticipated jobs report this morning, the most-cited numbers looked pretty good at first glance, with the unemployment rate dropping a hair from 7.4 percent to 7.3 percent, and the economy adding around 160,000 new jobs. Seems good, right? At least not bad? Neil Irwin pulls back the curtain:

But in almost all the particulars, you can find signs that this job market is weaker than it appeared just a few months ago, and maybe getting worse. The drop in the unemployment rate was caused by 312,000 people dropping out of the labor force. The number of people actually reporting having a job actually fell by 112,000 in the survey on which the unemployment rate is based.

Moreover, some analysts were expecting that the job numbers from previous months, which are always updated from this initial first estimate, would be revised upwards if the economy were indeed gaining steam. Instead, as Joe Weisenthal put it: “Last month was revised SHARPLY down from 162 to 104K. That is quite ominous.”

These numbers, as is evident above, are always subject to revision and it is unwise to put too much stock in any one report, but when so many numbers start slumping together, pessimism starts to set in. Irwin again:

Consider this: The nation has averaged 148,000 new jobs a month for the last three months. The number was 160,000 for the last six months, and 184,000 a month over the last year. That looks to me like a downward trend, no two ways about it. It’s certainly not the gradual acceleration that most mainstream economists have forecast as 2013 advances and the impact of tighter fiscal policy fades. Want another sign? The proportion of the U.S. population that had a job in August was 58.6 percent. Six months earlier, the number was a whopping — wait for it — 58.6 percent. The year is nearly three-quarters over, and the economy isn’t growing fast enough to put a higher proportion of its citizens back to work.

Were the economy really pulling itself out of its slump, there should be some hopeful signal in these numbers. Instead, porn shutdown aside, here is a reasonable representation of the sentiment this morning:

I’m becoming pessimistic about the fall. This report is disappointing, and shows previously-hidden labor market weakness. — Michael R. Strain (@michaelrstrain) September 6, 2013

Looking like we may have created a permanently larger pool of jobless Americans … — James Pethokoukis (@JimPethokoukis) September 6, 2013

Labor force participation rate down to 63.2%. Hasn’t been that low since 1978, my friends. A big problem. http://t.co/OQ1q2HaHvH — Michael R. Strain (@michaelrstrain) September 6, 2013

All gross nougat, no creamy caramel RT @Neil_Irwin: This jobs report is all soft underbelly, no muscular center. — Ezra Klein (@ezraklein) September 6, 2013

Men out of work MT @BCAppelbaum Declining labor-force participation is a really big short-term problem, or really big long-term problem — W Bradford Wilcox (@WilcoxNMP) September 6, 2013

Even the good news, the unemployment rate drop, is hollow, for as Ezra Klein puts it:

There are two reasons the unemployment rate dropped. One is that people get jobs. Huzzah! The other is that people stop looking for jobs, and so they’re no longer counted as technically unemployed. That’s what happened here. The number show 312,000 people dropping out of the labor force. That’ll be revised, but if the truth is anywhere close, it’s horrible.

As Congress comes back into session, this is what should be at the top of the policy debate. There are millions of Americans who are unable to find work, and many more who have given up even trying.

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