There's a dirty little secret
buried in the monthly employment data. It's a secret so dark, so
exquisitely threatening to the financial media industry that those who
reveal it risk being expunged from the community like magicians
revealing their tricks.
First the data. The National Bureau of Labor Statistics
reported that 192,000 jobs were added to the economy in March. The
unemployment rate stayed flat at 6.7%. The participation rate rose to
63.2%.
Now the dirty secret: none of that actually matters very much.
1. The number itself is simply
impossible to measure with any accuracy. Analysts had been expecting
200,000, leading some to call today's data disappointing, but that's
simply ludicrous. There are 10.5 million unemployed people in the
country and the total population is somewhere around 320 million. This
government can't calculate its defense budget to within $50 million in a
given year. Expecting specificity on monthly data is absurd.
2. The unemployment rate is
irrelevant. For the better part of two years the Fed told the world to
watch for 6.5%. That was the self-imposed "Big Number" at which the Fed
said it would consider adjusting policy. Within weeks of the
unemployment rate dropping below 7% the Fed told us to disregard the
rate and focus on more subjective matters. The FOMC knows the limits of
its own data.
3. No one knows what the
“participation rate” should be. The economy is trying to deal with the
retirement of about 70 million baby boomers. While the lack of
participation is concerning to economists and the public alike, no one
has any earthly idea what to expect from the famously rebellious former
hippies as they enter their golden years. Disturbing as it is to
consider, 60% could be the new normal.
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