4.1 Percent Unemployment Rate Does Not Mean We Are At Full Employment | Stock News & Stock Market Analysis

Jobs: The drop in the unemployment rate to 4.1%, while welcome news, has sparked more talk about how the economy is either very close to or already at “full employment.” Not so fast.

The latest numbers from the Bureau of Labor Statistics show that the economy created 261,000 jobs in October, and the unemployment rate is now lower than it’s been since December 2000.

That’s good. But there’s a problem if these numbers are used to justify anti-growth policies at the Fed to prevent “overheating,” or if they’re used to argue against tax cuts because they won’t have much of an impact on jobs.

President Trump’s pick for Fed Chairman, Jerome Powell, said that “By many measures, we’re close to full employment.”

Other economists were more emphatic. Brett Ryan, an economist at Deutsche Bank told The New York Times on Friday that “With jobless claims at 45-year lows, there’s really not a lot left on the sidelines. We’re at full employment.”

But look at the numbers more closely and you see that we are far from full employment.

First, the 0.1 percentage point decline in the unemployment rate in October was almost entirely the result of the fact that 968,000 dropped out of the labor force that month.

That’s right, for every new job created, nearly four people left the labor force.

The broader measure of unemployed — which combines those actively searching for a job with those working part time but want to work full time or are “marginally attached” to the labor force — show the jobless rate to be 7.9%.

And the IBD-TIPP poll shows that there’s likely even more slack than that. The October survey — which asks those polled whether they or anyone in their household is looking for work — shows that the share of job seekers is currently above 10%. This number, by the way, has consistently tracked higher than either of the BLS’s two measures.

Here’s another way to look at it. Back in December 2000, the unemployment rate was 3.9%. But that month, the labor force participation rate — the share of the population that’s either working or looking for a job — was 67%.

The current rate: 62.7%.

If the labor force participation rate were the same today as it was in 2000, the official unemployment rate would be more like 10%.

Some of this decline in labor participation can be explained by the baby boomer generation hitting retirement. But not nearly all of it. While the number of people above age 65 climbed by 14.3 million over the past 17 years, the population not in the labor force swelled by 25 million.

There is clearly still a need for pro-growth policies to get millions of workers sitting on the sidelines back to work.


Say Hello To 3% Growth

GOP’s Tax Reform: Despite Flaws, It’s A ‘Yuuuge’ Improvement

This Is Rich: Democrats Fight To Protect A $1.8 Trillion Tax Break That Benefits The Top 1%

Click here for more Commentary and Opinion from Investor’s Business Daily.

Want to make more money in the stock market? Start with IBD University.

Source link

Originally posted 2017-11-03 20:57:39.


No comments.

Leave a Reply

error: Content is protected !!