"Weakness in the labor force is frustrating to the Fed, which needs to see broadened participation from labor in this recovery," said Eric Green, chief market economist at TD Securities Inc. "What the Fed wants is the real stuff. They want unemployment falling with the labor force rising."
The Labor Department last week boosted the count of the U.S. working-age population by 1.51 million people based on findings from the 2010 census. Of those, 1.25 million, or 83 percent, weren't in the workforce, the data showed.
The adjustments are traditionally plugged lump-sum into the January data even though they represent changes that developed over the last decade.
The jump in the count of those not in the labor force caused the participation rate to drop to 63.7 percent last month, the lowest since May 1983. About 88 million Americans aged 16 years or older did not have a job and weren't trying to find one, the new data showed. The unemployment rate, which counts only people who say they are actively looking for work, would be higher if some of those sought employment.
"It is very important to look not just at the unemployment rate," Bernanke said in response to questions during the Tuesday hearing. "The 8.3 percent no doubt understates the weakness of the labor market in some broad sense."
Some people are leaving the workforce because they can't find jobs, and others are taking part-time jobs because they can't find full-time employment, he said.
Momentum for staffing agencies such as Troy, Mich.- based Kelly Services Inc. has grown since the end of 2009.
"The ongoing economic uncertainty will help create a greater awareness of temporary staffing benefits and a secular shift in demand for temporary workers," Carl Camden, president of Kelly Services, said in a conference call with analysts last week.
