What the new jobs numbers really mean

This is a rush transcript from "On the Record," May 4, 2012. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Well, you've heard the jobs numbers, but now here's what have you not heard. The shrinking job market means trouble for Social Security and Medicare, big trouble! Dennis Kneale, co-anchor of the noon hour of "Markets Now" on Fox Biz Network, a brand-new show that you can't miss, joins us.

Nice to see you, Dennis.

DENNIS KNEALE, FOX BUSINESS: Good to see you, Greta.

VAN SUSTEREN: All right, so while some people are, you know, all celebrating the 8.1 percent, there are a lot of people who say, Put the brakes on. Why?

KNEALE: All right, so unemployment is down from 9.1 to 8.1 percent in the past year, right? But one economist points out that 80 percent of that decline is not because more jobs are being created, it's because more people are dropping out of looking. They're just giving up and going home and stopping.

We're now at a 30-year low in the percentage of adult Americans ages 16 to 65 who are willing to work or are working. It's down to 63.6 percent or so, and that is the lowest in 30 years. So what is happening? Where are the people going? That's the big mystery.

VAN SUSTEREN: Well, the other sort of -- there are two problems. One is that they're going probably be on unemployment, some of them who are eligible. But the other problem, too, is that -- is that when we have a lower workforce, it means less people are paying into Social Security and Medicare to the extent that they're paying to offset, you know, future expenses.

And I just read Senator Tom Coburn's book, and there's something like 15 people who are working for every recipient in 1950. We're now down to about 3.


VAN SUSTEREN: So if the workforce shrinks, we're -- you know, we're in deep trouble.

KNEALE: Exactly. That is a big problem because the fact is, we're down to 3 or less than 3 workers now. And if you think that you pay in $3,000 or $4,000 per year to Social Security and we have close to 14 million unemployed and we have another 10 million or 11 million underemployed, meaning they're not paying as much as they would have paid, you do start to get a financial crisis there.

And in terms what to do about it, you know, Congress figures, Well, you got to raise tax rates to bring in more revenue. You know, we're -- we're -- we've collected over decades -- 18 percent GDP we collect in tax revenue. But in the last couple of years, only 14 percent.

What can you do to get the tax revenue both for Social Security and the general fund? Well, you know, other people say you got to cut tax rates to stir (ph) business. Which way do you go?

But where are these people dropping out? Do you really think, Greta, that people who are depressed, Oh, I've been looking for a job, I can't find one, well, I'm just going to starve and not eat? I'm going to stop looking. I find that hard to believe. Something else is going on here.

VAN SUSTEREN: Well, if -- if we're -- if -- also, if people, you know, are dropping out of the -- are dropping out of the workforce or aren't -- don't have jobs, they can go ahead and raise the taxes all they want, but they're not going to raise it on those people because those people aren't going to be paying, so there's -- so the people who are working got a bigger problem.

All right, now, why is the economy so sluggish? Is it there's a little bit of sort of a wait-and-see attitude to figure out what happens come November? Or you know, are there other reasons that -- what's the drag on the program?

KNEALE: Well, you know, I'm sure that the outlook and the confidence is low and the policy problems. And I think our government, especially the Obama White House, frankly, has a lot of very anti-business policies! No sooner do we have a boom going on someplace, then they want to, like, look at what's wrong! Natgas in the U.S. at an all-time wonderful boom. Oh, my gosh, let's regulate it! It's going to ruin the environment!

Hollywood's doing big deals with China on filmmaking. Let's investigate! Are they doing bribes? I mean, they're constantly knocking on your door to find out what it is you're doing wrong!

But also, there's more economic things (INAUDIBLE) We're going over to a digital economy from a manufacturing economy. We haven't made that transition. It's been going on for 20 or 30 years, and it's really coming home to roost now more than ever.

We've got more early retirements going on, people in their 50s and early 60s who take the money and run and get out early. Well, they stop looking. And then they stop paying Social Security taxes.

I mean, overall, those are one thing, Greta. You know, Congress just approved that Social Security tax cut, payroll tax cut. It comes to billions of dollars a year. That's another thing that's hurting the Social Security fund is that they're cutting the taxes of the people who are employed and are paying into the fund!

VAN SUSTEREN: Dennis, thank you. Always nice to see you. And reminder that brand-new show Dennis has on the Fox News Business Network, or the Fox Business Network. Nice to see you, Dennis.

KNEALE: Thanks a lot.