By Matt McDonald, (202) 822-1205, mmcdonald@hamiltonps.com

To see the updated HPS cheat sheet, click here.

The jobs number today of 243,000 new jobs was great news, beating expectations, and bringing with it strong underlying data of increased hours worked, increased earnings and a drop in the average weeks of unemployment.

The asterisk to the report this month was a significant set of population revisions that happened over the past year, and concerns over people dropping out of the workforce.ᅠAs we outlined in our white paper, the labor force participation rate has become a major concern during the recovery, and this month was no exception.ᅠThe participation rate plummeted from 64 percent to 63.7 percent.

Demographic projections expect that participation rate to be at 65.3 percent.ᅠIf that full participation rate is the goal, our economy is “missing” 3.8 million workers, up from the 3.4 million we noted in the white paper.ᅠThe unemployment rate in that context has not budged at 10.4 percent.

Taking into account the population revisions of the past year, we now have a better view of the drop in the unemployment rate from 9.1 percent to 8.3 percent.ᅠIf the participation rate last January (64.2 percent) were the participation rate today, the unemployment rate would be 8.9 percent, instead of 8.3 percent, so most of the shift of the past year is due not to the improvement in the labor market, but the continued drop in participation in the labor force.

What does all of this tell us?ᅠWe know today the same thing we knew yesterday: the jobs trends are moving on the right direction, and they need to move in that direction faster.

If the participation rate does level off at its current rate, the President needs 231,000 jobs per month to get below 8 percent unemployment by Election Day. If the participation rate continues its downward slide, that number would be much lower, but wouldn’t necessarily be good news.

The red flag all these numbers raise is the real risk of a structural problem in the labor force right now.ᅠIt is possible that we are now seeing the scars of three years of weak jobs numbers, with a significant portion of Americans falling into an “unemployable” category, the effects of which may last for years to come.

Matt McDonald is a partner at Hamilton Place Strategies and a veteran of two Presidential campaigns and the White House.ᅠPrior to joining HPS, Matt worked for McKinsey and Company. He holds an MBA from MIT’s Sloan School of Management and a degree in economics from Dartmouth College.