Our policy-leaders are idiots from one end to the other. The unemployment rate is the biggest lie this corrupt society tells itself. We are to believe that millions of able-bodied workers all "retired" at the same time in 2008. I don't even look at the U3 (published) unemployment rate anymore, aside for a good laugh. Today's EconoDunces live by it. Because without the lie of false recovery that it conceals, they would be permanently out of a job. This time they lied to themselves.
"Official unemployment rate per the ILO definition occurs when people are without jobs and they have actively looked for work within the past four weeks."
Sadly, what was once an economic problem has crossed the Chinese Wall to now being a financial problem. What do I mean? The policy of lower for longer interest rates for the past two decades means that debt has now supplanted employment as the primary means of economic support. Therefore traditional metrics for managing the economy aka. "The Phillips" curve no longer work. The Phillips curve linked the unemployment rate to inflation and therefore attempted to "predict" the length of the cycle. The point at which "full employment" would put an end to economic expansion. Due to mass layoffs and eight years at 0%, that relationship no longer abides. Throw in a fabricated unemployment rate and it's a recipe for policy disaster.
Here is why interest rates are rising, because ten years later the labor market is finally starting to broaden to include those affected by mass layoffs. Kind of.
"The least educated American workers, who took the hardest hit in the Great Recession, were also among the slowest to harvest the gains of the recovery. Now they are a striking symbol of a strong economy."
The unemployment rate for those without a high school diploma fell to 5.1 percent in July, the Labor Department reported Friday, the lowest since the government began collecting data on such workers in 1992"
Here below in blue is the labor participation rate for workers aged 25-54. The "official" unemployment rate is in red. The article above states that the unemployment rate is the lowest ever for unskilled workers. And we also see below that the overall official unemployment rate of 3.9% is the lowest since Y2K.
Yet we see here that the labor participation fell for eight years straight, and is still below where it was during the entire prior two cycles. Multi-decade low "unemployment" is somehow now synonymous with generational low labor participation.
Yet we see here that the labor participation fell for eight years straight, and is still below where it was during the entire prior two cycles. Multi-decade low "unemployment" is somehow now synonymous with generational low labor participation.
Here we see the 25-54 year-old labor participation rate (blue) with the Fed Fund rate (red). Trumpflation still sees labor participation near generational lows, yet rates keep rising because "unemployment is at 20 year lows". The fraudulent unemployment rate is sending false signals about the ability of the economy to absorb rate hikes.
Now if one is an optimist, meaning denialist, they would conclude that this nascent two year "reflation" will continue until such time as the labor participation rate recovers back to 2007 and then on to Y2K levels. Even though we see above that in 2007, the labor participation rate never recovered back to the Y2K peak. We also see that interest rates are rising in lockstep with the late stage capitulation to McJobs.
Which gets me back to the point of this post. The cycle is no longer tied to the employment level. It's now tied to the overall debt level. Because as jobs improvement drives interest rates higher, it now is impinging upon the prior eight years of 0% debt accumulation. Meaning that "reflation" and economic recovery is now stymied by massive debt overhang.
Here we see consumer credit delinquencies (blue) with the Fed rate (red).
At this point in the last cycle rates were falling, not rising.
The Fed made it clear this past week that their real mandate is the inflation and deflation of asset bubbles to provide the delusion of fake wealth.
Something they excel at.
I misspoke previously, Fed asset rolloff increases to $50 billion/month beginning in October. I said $40b.
