There's Lots of 'Abnormal' In 'New Normal' Joblessness

February's job growth shocked the markets like they had seen a ghost. Robust growth and a drop in the unemployment rate to boot - it was just too good to be true. And actually, it was: the latest job picture is not unreservedly positive - there is less here than meets the eye.

February's job report headline was good news - 236,000 jobs created and a fall in the unemployment rate to 7.7%. The bad news is that this was such good news. Saying that a 7.7% unemployment rate is the lowest in four years is to damn with faint praise.

First, unemployment is still high - quite high, frankly. Unemployment has merely gone from bad to less bad.

It is still considerably higher than December 2008's 7.3% rate. That 2008 level itself had not been seen in 15 years - since January of 1993. Now we have had 50 consecutive months when the unemployment rate has not fallen below what had until then been considered abnormally high. If unemployment had been at February's 7.7% level over the last 50 months, we would still be talking about the most protractedly elevated unemployment level since the Bureau of Labor Statistics began recordkeeping in 1948.

How high has unemployment been? Over 2009-2012, the average annual unemployment rate has been 9%. Put into perspective, there have been ten years since 1948 when annual real GDP has been negative - two of those being 2008 and 2009. During those ten negative economic growth years, only 1982's annual unemployment rate (9.7%) was above the last four years' average. Since 1948, there have only been two years (1982 and 1983) overall, where annual unemployment rates above the 2009-2012 average.

Little wonder why America has started to get inured to high unemployment: It's been around a long time. And it is unlike anything we have seen during the last seven decades - even when looking at negative economic growth years. Familiarity has not bred contempt, so much as a resigned acceptance.

Remember too that the economy last contracted in Q2 of 2009 - almost four years ago. So, it is not as though economic contraction is the culprit.

Second, to get this still elevated level of unemployment as low as it is, has required the conspiring of other important components of America's employment engine.

February's 143.5 million employed is still almost 2 million less than 2008's annual employment rate of 145.4 million. Comparatively, the annual civilian non-institutionalized population is now almost 10 million higher - 243.3 million in 2012 to 233.8 million in 2008 - yet the civilian labor force in 2008 was almost identical to today's - 154.3 million to 155 million in 2012.

The large discrepancy between then and now - and between potential employment and actual employment - is of course today's enormous number of labor force nonparticipants.

These nonparticipants are the ghosts haunting America's employment picture. Neither here, nor there - neither employed, nor unemployed - they float like phantoms between the two. We know they are there, even when we do not see them.

February's job report showed nonparticipants at 89.3 million. That's almost a million more than 2012's annual rate (88.3 million) and almost 10 million more than 2008's annual rate (79.5 million).

Looked at another way: If 2008's labor force participation rate of 66% prevailed today, instead of February's depressed 63.5%, then there would be over six million more in the labor force and the unemployment rate would be an incredible 11.6% - the highest in the BLS' records!

February's job creation was really no more than what used to be normal. However, over the last four years, we have seen precious little of that. And if we look inside its headline number, which used to be normal, we find lots of abnormal.

A whimsical little poem, from the turn of the last century, accurately captures America's conundrum with the latest unemployment data.

"Last night I saw upon the stair

A little man who wasn't there

He wasn't there again today

Oh, how I wish he'd go away."

The question is whether what we are seeing is in fact again "normal." Or are we seeing "the little man," who is not really there at all? Are the latest job creation figures here now, only to have disappeared at second look? Are we really seeing what once we were so accustomed to see and so want to see - or just a phantom, which we can see right through?