The headline story on Friday was very positive: The unemployment rate dropped from 9.8 percent to 9.4 percent, putting it at its lowest point since May 2009. The private sector added 110,000 jobs in December, meaning that there were private-sector jobs added every single month in 2010- the first time we can say that since 2006. If you leave aside the hiring of temporary census workers last spring, December added the most jobs of any month since January, and the third-most since 2007.
So that's the good news. The bad news is that the biggest reason the unemployment rate fell, a larger factor than the job growth itself, was the departure of 260,000 Americans from the labor force. That's the biggest such group to do so since July.
What may happen, as the economy gains strength, is that some of these discouraged workers will try to re-enter the workforce - and paradoxically, a stronger economy may be accompanied by a rise in the unemployment rate. It probably makes more sense to look more closely at the raw number of jobs created than the overall unemployment rate.
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