What the Unemployment Rate Does Not Tell You About the Economy

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The way they keep those statistics on who unemployment has been changing to make it look rosier than it really is. Yes. But I would say there’s another statistic, which is more important, which is labor force, the labor force participation rate, which is down around the 61% now. But as recently as the 1990s, early two thousands, it was around 67%.

So that’s a six and a half point. Decline or 10% decline if you think of it as a percentage of the whole, that’s a big deal. That number is the lowest. It has been since the 1970s, when women first started coming into the workforce in large numbers. Now, if you don’t have a job. But you’re not looking for a job.

You’re actually not counted as unemployed. The unemployment number we saw and yeah, declined from it was hit about 13%. Last spring came down to 10. Now it’s around a seven or so maybe slightly higher. That’s still high, but it’s a significant improvement over where it was last April, let’s say, but that’s not the number that matters.

The number that matters is labor force participation. So what’s happened is. Tens of millions of Americans have, have left the workforce there. And I’m talking to ages 25 to 54. I’m not talking about a 68 year old who wants to keep working or a teenager, or we’re not talking about disabled. There are perfectly good reasons for people not to be in the workforce.

There are always some, but we’re talking about able-bodied individuals between the ages of 25 and 54 prime working ages who have left the workforce. If you’re not. Banging on the door of the unemployment office is looking for a job. They don’t count, it was unemployed, but you’re not working and you’re not producing.

And so I look at that number because to me it’s a better gauge of economics displayed right here. So that’s just simply Google and the labor force participation. Right. Kept up by the U S Bureau of labor statistics. And is this pretty much it, this is what makes it hard, right? Because everybody hears the news headlines and we know they’re always just trying to sell use headlines, just like other talking about how collections are horrible, but I don’t see any of that issue happening.

In other words, saying that. Unemployment’s down, but is this really the way to cut through that noise? Yeah. This is a more manual chart than the unemployment rate. Again, this is the labor force participation rate. Now you notice you heard a lot of talk in the last March, April, may about the V-shaped recovery and pent up demand and all that.

And you look at that chart and look at labor force participation while you see the steep decline at the time of the pandemic. Okay. Got it. It came back. But that’s not a, the that’s like a half a B, in other words, the bounce now it’s flat and going down again. So yeah, you had a little bit of a bounce back.

That was to be expected after the, we got through the original round of lockdowns in may, in June, she had that bounce back, but then a flat line, and now it’s going down again. That’s consistent with what I said earlier, which is we’re heading back into another recession right now. Because there’s a new round of lockdowns.

You don’t need a Ph.D. to figure this out. You locked down half the economy. You’re going to get a reception. It’s as simple as that.

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