The unemployment rate falls to 8.3 percent, the stock market futures roar and the commentators practically batter themselves in this Wall Street Journal thread (with one going so far as to wonder if “…it’s a bit too early to start cranking up this old chesnut?”).
Yes, the headline numbers are quite good, particularly for those who understand that strong headline numbers mean even stronger chances of winning voter favor.
But as the inestimable Zero Hedge points out, the headlines, and all the shouting behind them, are so much nonsense:
A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by an unprecedented record 1.2 million. No, that’s not a typo: 1.2 million people dropped out of the labor force in one month! So as the labor force increased from 153.9 million to 154.4 million, the non institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million. Which means that the civilian labor force tumbled to a fresh 30 year low of 63.7% as the BLS is seriously planning on eliminating nearly half of the available labor pool from the unemployment calculation. As for the quality of jobs, as withholding taxes roll over Year over year, it can only mean that the US is replacing high paying FIRE jobs with low paying construction and manufacturing. So much for the improvement.
So unemployment is down in a rapidly shrinking labor pool. And the jobs that are created aren’t quite equal to the ones that existed before (make sure to click over and look at the charts on the ZH post — they are eye-popping).
If all this is what the return of happy days looks like, we’re doomed.
More – this graph from the St. Louis Fed adds some visual perspective. The civilian participation rate has drops significantly after recessions going back to the 1940s before rising again. We may still be in the adjustment phase (click on the image to embiggen):