If Trend Continues, Unemployed will Outnumber Employed in 4 Years
Zero Hedge
With even the Fed somewhat challenging the credibility of the
official unemployment rate – as labor force participation collapses
structurally – the possibility that if Congress does not act by
Dec 28th, a further 1.3 million people will lose emergency aid and may
be deemed ‘out’ of the labor force merely exaggerates an already farcical situation. As JPM’s Mike Feroli notes, the “official” unemployment rate may drop up to 0.8 percentage points, but it won’t mean the economy is any better.
Is this the ‘excuse’ the Fed needs to transition from QE to forward
guidance (with the public seeing only a rapidly collapsing unemployment
rate as evidence of their success) even as the data that they are so
“dependent” on becomes worse than useless?
As we warned in November, the only two charts that matter ahead of Friday’s likely distorted nonfarm payrolls report.
First, the labor force participation rate, which plunged from 63.2% to 62.8% - the lowest since 1978!
But more importantly, the number of people not in the labor force exploded by nearly 1 million, or 932,000 to be exact, in just the month of October, to a record 91.5 million Americans! This was the third highest monthly increase in people falling out of the labor force in US history.
At this pace the people out of the labor force will surpass the working Americans in about 4 years.
And if the Congress does not pass the bill to extend emergency aid – set to expire Dec 28th – then up to 1.3 million more people will be added to that list of 91.5 million already our of the labor force (and another 800,000 more to come in further months)…
This has profound implications for the oh-so-important unemployment rate that the Fed is so dependent upon.
