Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Number of Discouraged American Workers Hit Record High: QE3 = A Matter of When

Economics / Employment Jan 09, 2011 - 08:32 AM GMT

By: Dian_L_Chu

Economics

Best Financial Markets Analysis ArticleThe latest U.S. Labor Department data indicated that non-farm payroll added 103,000 jobs in December, which is far short of expectation, but the unemployment rate somehow managed to fall sharply to 9.4% (from 9.8% in November) far exceeding expectation.


103k Jobs Not Enough To Drop Unemployment Rate

The current consensus is that the U.S. economy would need to create 150,000 to 175,000 new jobs each month in the next 5 years or so, at minimum, just to restore the 8+ million jobs wiped out by the Great Recession.

Since the nation added only 1.1 million jobs in total last year, or averaging 94,000 jobs a month, the 103,000 new jobs added, coupled with a 0.4% drop in unemployment rate in December, simply does not make much sense.

Totally Discouraged

Nevertheless, a closer look at data the Bureau of Labor Statistics (BLS) tells that the drop in unemployment had very little to do with newly created jobs. Instead, it was primarily due to 260,000 workers dropping out of the labor force. As a result, the labor force has shrunk by 246,000 from the pre-crisis 2007 level (The U.S. labor force average growth rate is supposed to be around 0.8% per year from 2000 to 2050, according to Joel Kotkin, a scholar on urban development.)

Furthermore, not only the number of discouraged workers over job prospects hit a record high (since 1994, the earliest year the data is available) of just over 1.3 million (Fig. 1)--more than the number of jobs added in 2010--but the labor participation rate also plunged to a 25-year low of 64.3% ....post-recession! (Fig. 2).

Most Disturbing – Long Term Unemployed

Most disturbingly, the average number of weeks people remain unemployed also has risen to 34.2 weeks in December vs. 33.9 weeks in November, with 6.4 million jobless people classified as long-term unemployed, i.e. without a job for 27+ weeks.

The All Inclusive Jobless Rate Could Be 11%+

All these suggest there is a large number of frustrated workers who left the labor pool but unaccounted for in the unemployment rate calculation. That means the all inclusive jobless rate could easily be 11% or more, instead of the 9.4% flashing in headlines today.

Needed - 300k Jobs Per Month

Overall, the latest employment report seems to reflect a painfully slow-recovering, but still confused labor market. Large corporations are hoarding cash reluctant to hire or invest fearing uncertainties ahead, while small business still strapped for cash and credit can’t afford to hire since business is still slow.

Most economists estimate that that in order to make a meaningful dent in the jobless situation while keeping up with the labor force growth rate, new job creation needs to be at around 300,000 a month going forward, which is a long way from where the economy is right now (Fig. 3).

Worse Before Better

Furthermore, since the long-term unemployment benefits have been renewed, they could bring more people back into the labor force leading to a rise in the unemployment rate. So, things may get worse before they get better, and that Federal Reserve Chairman Bernanke is probably right when he said it could take “four to five years” before the unemployment rate is back to a more normal 5% or 6%.

Housing & Auto - Key To Jobs

On the other hand, the economy could get there a lot faster beating Bernanke's estimate if both housing and auto sectors could really fire on all cylinders, and if the Administration would really start pushing for more jobs-friendly policies and measures, as the presidential re-election is due in 2012.

QE3 - A Matter of When

Moreover, I think with this latest employment report, it looks like QE3 could be just a question of when, and there’s no way Fed would cut QE2 early as some speculated.

That, of course, will evolve into a total beast by itself later on. But we could always remain hopeful that the U.S. labor market and economy would be strong enough to tackle that equally, if not more, daunting challenge.

Disclosure: No Postions

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

© 2010 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules