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By Michael Lombardi, MBA

As I have been pointing out to my readers, the "official" unemployment numbers issued by the government are misleading because they do not include people who have given up looking for work and those people with part-time jobs who want full-time work.

In January, there were 3.6 million individuals in the U.S. economy who were long-term unemployed - out of work for more than six months. (Source: Bureau of Labor Statistics, February 7, 2014.)

Those who are working part-time in the U.S. economy because they can't find full-time work stood at 7.3 million people in January.

Add these two numbers into the equation and the real unemployment rate, often called the underemployment rate, is over 12%. Meanwhile, the official unemployment rate from the Bureau of Labor Statistics sits at 6.6% - that's the number you will hear politicians most often quote.

But if there's a group of policymakers that looks past the "official" unemployment numbers, it's the Federal Reserve.

At her speech before the Committee on Financial Services, U.S. House of Representatives in Washington, D.C. last week, Fed Chief Janet Yellen said, "Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high. These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market." (Source: "Semiannual Monetary Policy Report to the Congress," Federal Reserve, February 11, 2014.)

Like all economists, Yellen knows that when an individual has a part-time job then their income isn't as high, so they pull back on consumer spending. This also results in a greater reliance on government assistance programs because these people often cannot afford to pay for even the most basic needs- none of which is good for economic growth. That's why food stamp usage in the U.S. economy has risen to a record-high.

Unfortunately, the news for the jobs market hasn't been bullish going into 2014. Take The Home Depot, Inc. (NYSE:HD), for example. The giant home improvement retailer said it would be hiring 80,000 part-time positions in preparation for spring. (Source: The Home Depot, Inc., February 12, 2014.) A preferable announcement would say, "We are hiring for full-time work."

With the jobs market in the U.S. economy continuing to be ever so fragile, consumer spending in the U.S. economy is declining. In January, retail sales in the U.S. economy declined 0.4%, and the previous month's numbers were revised lower, from a 0.2% increase to negative 0.1%. (Source: U.S. Census Bureau, February 13, 2014.) December and January are usually good months when it comes to consumer spending. This year, it has been different. This is something definitely worth considering.

Dear reader, yes, the official unemployment rate will probably decline over the next few months. And we know why - when the government makes the calculation, it leaves out people who have given up looking for work and those people who have part-time work but want full-time work. Those are two big groups of people. Another issue persists: the majority of jobs created in the U.S. economy since the Credit Crisis hit have been in the low-paying service and retail sectors.

What needs to be seen next, what is so important, is how Janet Yellen deals with the poor unemployment picture of the U.S. economy. Will she follow in the footsteps of her predecessor and just print more paper money with the hope the benefits will trickle down to the unemployed? Or will she do something different?

What is so interesting to me so far is that Yellen has given every indication that the Fed will continue pulling back on its quantitative easing program throughout 2014. There are seven more Federal Open Market Committee meetings scheduled for this year. (Source: The Board of Governors of the Federal Reserve System web site, last accessed February 14, 2014.)

If the Fed keeps pulling back on printing at the rate of $10.0 billion per month, as it has been, that means that by the end of this year, the Fed will have stopped its quantitative easing program - it will have stopped printing the extra paper money it thought would help jump start the U.S. economy.

Putting all this together - if the Fed is pulling back on printing, the real employment picture in the U.S. economy is not improving, and consumer spending is getting weaker, how can U.S. public companies see their profits grow in 2014? My guess is that corporate profits will not grow in 2014, and stock prices will violently reflect this realization.

Disclosure: None.

Source: 10 Million People Left Out Of Employment Statistics?