The very good Floyd Norris summarizes the state of the labor market. As I've said many times, the most obvious explanation is that employment is low because the labor market is weak, and taht labor force participation is y because half a decade of a weak labor market has convinced a lot of people that they have better things to do--go to school, raise a kid, retire early, et cetera--than look for a lousy job.
Norris gets two things wrong, however. He gets the lead wrong: I haven't heard anybody--not even White House spinmaasters--paint the emploment recovery as "one of the best" since World War II. That doesn't pass the laugh test. And he overstates the role played by the divergence between the household and establishment surveys. They don't paint all that different pictures.
The Odd Recovery: Unemployment Is Low and So Is Employment - New York Times: NEARLY five years after the end of the 2001 recession in the United States, this recovery can be painted using employment statistics as the worst -- or one of the best -- of the aftermaths of the 10 post-World War II recessions. On the good side, the unemployment rate, at 5.5 percent in November 2001, was down to 4.7 percent.... At this point after the previous nine recessions, there were an average of 11.9 percent more jobs in the economy than there had been at the end of the recession. But so far, as the charts show, there are just 3.5 percent more jobs than at the end of the last recession. That is less than half the lowest of the nine previous moves... . To some extent, the divergent indicators reflect the fact that the numbers come from two surveys with different methodologies.... [But e]ven the household survey, with its more positive numbers, indicates that little progress on jobs has been made in this recovery. There has been almost no increase, by these statistics, in the percentage of working-age Americans who are working. The decline in the unemployment rate reflects the fact that fewer of those without jobs say they are looking for work, as is required to be counted as unemployed....