Tags: Labor Market Contracts by 1.2 Million People | Zero Hedge Reports

Labor Market Contracts by 1.2 Million People, Zero Hedge Reports

Friday, 03 February 2012 02:00 PM

The labor market contracted by 1.2 million people in a month, according to research from Zero Hedge, citing Bureau of Labor Statistics data.

The government reports that the unemployment rate fell to 8.3 percent in January from 8.5 percent in December as the economy has added a net 243,000 nonfarm payrolls to the economy.

However, those who quit looking for work aren't counted as part of the total labor force, which also isn't accurately reflecting population growth, which basically allowed the government to yank 1.2 million out of the labor force in January.

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"As the labor force increased from 153.9 million to 154.4 million, the non-institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million," Zero Hedge reports.

"Which means that the civilian labor force tumbled to a fresh 30 year-low."

A smaller labor force keeps the unemployment rate low.

Others point out chinks in the armor among those claiming more solid recovery was under way.

Unemployment rates still is way above pre-recession levels, and the fate of the entire European economy remains up in the air.

A default in debt-ridden countries like Greece could rattle financial systems worldwide.

"It’s better than it was, but we’re skeptical that it’s sustainable given the continuing unraveling," says Walter Zimmerman, senior technical analyst at United-ICAP just after the jobs data emerged, according to CNBC .

"We think the next big bomb to drop will be coming from Europe anyway."

Other experts remain skeptical if the U.S. job market can sustain such gains.

"We’ve been here before with 200,000 plus monthly gains in payrolls in spring 2010 and spring 2011 that ultimately came to nothing," Toronto-based Capital Economics said in a note to clients, CNBC adds.

"With housing still in the dumps, fiscal policy being tightened and the eurozone crisis likely to flare up again at any moment, we still think the U.S. will endure another year of weak growth in output and employment."

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