The adjustment increased the estimated size of the civilian noninstitutional population in December by 1,510,000, the civilian labor force by 258,000, employment by 216,000, unemployment by 42,000, and persons not in the labor force by 1,252,000. Although the total unemployment rate was unaffected, the labor force participation rate and the employment-population ratio were each reduced by 0.3 percentage point. This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population.Although the reasons for it have more to do with demographics than with discouraged workers, it is still disturbing to see that the revision pushed the labor force participation rate down to 63.7%, its lowest since 1983.
Labor Force Participation Rate (Seasonally Adj.)
The revisions also mean that, despite strong employment gains in the month, the employment-population ratio remains at a depressed level of 58.5.
Employment-Population Ratio (Seasonally Adj.)
Although the establishment survey jobs number gets more attention because it has a larger sample than the household survey, the household survey was stronger: the number of people reporting that they were employed increased by 847,000. After removing the effect of the revision to the population data, the increase was 631,000.
January is a month with a big seasonal adjustment, which attempts to remove the effect of the decline in employment that normally occurs during this time of year (e.g., many holiday retail jobs end). On a non-seasonally adjusted basis, the unemployment rate in January was 8.8%, and payroll employment fell by almost 2.7 million. Floyd Norris has a skeptical note on the seasonal adjustment.
Overall, this report was good, but not nearly good enough. While it is nice to see employment growth at a pace strong enough to actually improve things a bit (i.e., faster than the 125,000-ish jobs per month needed just to keep the unemployment rate constant as the population grows), the employment-population ratio illustrates that the economy is far from healthy. 12.7 million people remain unemployed, of whom 5.5 million have been unemployed more than 27 weeks, and "U-6", the BLS' broader measure of unemployment which incorporates discouraged workers and part time workers who want to work full time, is at 15.1%.
See also: Ezra Klein, Free Exchange's Greg Ip, Calculated Risk.