Today’s release of the U.S. Employment Situation Summary for November 2013 by the Bureau of Labor Statistics (BLS) provides relatively good labor market signals, but there are exceptions. Much of the improvement comes from a reversal of weaker data due to the government shutdown, which was to be expected

According to the establishment survey, employers added 203,000 net jobs in November, bringing the 12-month average to 195,000. Using the household survey, last month’s data compared with September-the month before the government shutdown-shows the unemployment rate fell to 7 percent from increased hiring and 265,000 fewer Americans looking for work, which lowered the labor-force participation rate to 63 percent-a level not seen in 35 years!

Although employment rose by 2.3 million over the last year, 10.9 million people remain unemployed and many more have stopped looking for work or are working part time but would like a full-time position. If these latter two types of individuals were included, the unemployment rate would be just above 13 percent. Despite some signs of optimism for workers, this report supports a continued depressed labor market and by far the worst job recovery since WWII (see Figure 1).

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Considering the unemployment rate and other labor market metrics may be distorted from demographic trends with baby boomers retiring and other concerns, consider the labor-force participation rate and employment-population ratio for 25 to 54-year-olds (see Figure 2). 

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As you can see from Figure 3, the labor-force participation rate for this cohort continues to decline and their employment-population ratio is essentially unchanged over the last four years. Collectively, these data indicate the labor market remains depressed no matter the demographic trends and in spite of being in an economic recovery for four years and trillions of dollars spent on stimulus packages, unconventional monetary policies, and other government interventions.  

Another caveat from the establishment survey is that government employment has declined by 26,000 this year; however, it depends on whether you consider state and local or federal government employment (see Figure 3).

State and local government employment increased by 70,000 to 19.2 million since November 2012, but the sequester passed by the U.S. Congress in 2011 contributed to a decline of 96,000 to 2.7 million employed at the federal level. Despite the fact the core functions of government have not changed and some of the increase could be expected from population growth and inflation, total government employment has increased substantially since 1955. Moreover, the economy continued to move along and state and local governments seemed to work pretty well last year without the additional 70,000 employees.

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Although the president recently urged Congress to pass more stimulus measures, raise the minimum wage, and further expand the government’s role in the marketplace, another path should be chosen: reduce the size and scope of government at all levels. If this path is chosen, we can once again unleash the foundations of Capitalism that has provided the greatest prosperity to individuals the world has ever known.