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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: zonder who wrote (1856)3/12/2004 9:40:26 AM
From: Wyätt Gwyön  Read Replies (2) of 116555
 
the unemployment rate is very misleading, and it is not related to what you were discussing with JWCB. the reason is they keep lowering the labor force participation rate in order to maintain stable unemployment rate. if you are out of work for 6 months in the US, you are no longer "unemployed". instead, you are considered to be uninterested in working, so you are no longer part of the labor force or the unemployment rate.

more than a quarter million people exited the labor force in this manner in January.

if the unemployment rate were calculated using the same labor force participation rate was was calculated in Feb 2001, it would be 7.4%, not 5.6%. there are a number of other factors as well, which puts the effective unemployment rate at around 10-11%.

i have not heard of any knowledgeable financial observers who take the headline US unemployment rate seriously.

otherwise, one would be forced into the ridiculous position of trying to explain a declining unemployment rate in the face of a drop in employment of nearly 3 million actual jobs, even as the working age population grows by 144,000 a month.

the shortfall in terms of job additions between this expansion and a typical expansion at this stage is something like 8 million jobs (5-6 million or so net adds, instead of 2.5 to 3 million lost).

when you consider this, i think you will agree that the unemployment rate is pretty meaningless except for political purposes.
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