Not so good news on unemployment after all

WSJ headline: "Jobless Rate Nears Three Year Low."  At first glance a drop of unemployment from 9 to 8.6 percent would seem to be a welcome development.  But a reduction in unemployment does not necessarily mean an equal increase in employment.  The reason: people stop being classified as being unemployed if they quit looking for work. 

As another WSJ blog post shows, the number of unemployed persons (as measured by the household survey) fell by 594k and roughly half of those got jobs and the other half dropped out of the labor force.  But were there really nearly 300k new jobs?  The more reliable employer survey indicates that payrolls grew by a much smaller 120k.