Given it is payroll Friday, it has to be a chart related to the futility of focusing on the headline number. There is any number of ways with which to accomplish this, but it serves well to highlight the relationship already presented in my view of this specific view of the payroll report. Economists often claim that the participation problem isn’t really a problem because of demographics, and when they don’t make the claim they just ignore it altogether.
In August 2014, Janet Yellen spoke about the challenges this unique labor environment would present as the FOMC contemplated ‘full employment’ as a real possibility.
Estimates of slack necessitate difficult judgments about the magnitudes of the cyclical and structural influences affecting labor market variables, including labor force participation, the extent of part-time employment for economic reasons, and labor market flows, such as the pace of hires and quits. A considerable body of research suggests that the behavior of these and other labor market variables has changed since the Great Recession. Along with cyclical influences, significant structural factors have affected the labor market, including the aging of the workforce and other demographic trends, possible changes in the underlying degree of dynamism in the labor market, and the phenomenon of ‘polarization’ – that is, the reduction in the relative number of middle-skill jobs.
She adds nothing about the huge, yawning overall lack of recovery, just hints at why it isn’t the Fed’s fault that the recovery when it does get to full might not be as full as in the past.
This post was published at David Stockmans Contra Corner on August 5, 2016.
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