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Is Yellen Being Misled By Employment Statistics?
Submitted by Lance Roberts of STA Wealth Management,
Yesterday, Chairwoman Janet Yellen presented the Federal Reserve's Semiannual Monetary Policy Report to the Congressional Committee on Banking, Housing, and Urban Affairs. While the financial markets were closely focused on clues as to the future direction of monetary policy and rate hikes (see "Analyzing Impact Of Fed Rate Hikes), I wanted to address her comments regarding the current employment situation and outlook.
"In the labor market, gains in total nonfarm payroll employment averaged about 230,000 per month over the first half of this year, a somewhat stronger pace than in 2013 and enough to bring the total increase in jobs during the economic recovery thus far to more than 9 million. The unemployment rate has fallen nearly 1-1/2 percentage points over the past year and stood at 6.1 percent in June, down about 4 percentage points from its peak. Broader measures of labor utilization have also registered notable improvements over the past year."
While it is an accurate statement that the U-3 unemployment rate, as reported by the BLS, has dropped to 6.1% as of the latest report there is much controversy surrounding the validity of that statement. (For more on this read: What Is The Real Unemployment Rate?")
However, when it comes to creating economic growth it is only full-time employment that matters. Full-time employment fosters higher income levels, promotes household formations and increased consumption. In an economy that is roughly 70% driven by consumption, the "quality" of employment is much more important than the "quantity."
Therefore, the first chart below shows the ratio of those that "usually work full time" as compared to the working age population (16-54 years of age.)
(Note: While the latest report from the BLS showed an increase of 288,000 jobs in June, the full-time employment to population DECREASED by 0.5% due to the loss of 580,000 full-time jobs.)
What is missed by most of the economic reporters and analysts is that while jobs are created from one month to the next, the working age population is also growing. Since the official end of the recession in June of 2009, as shown in the chart below, employment has grown by a cumulative total of 7.8 million while the working age population (individuals between the ages of 16-54) has grown by over 12.3 million.
While employment has indeed returned to levels seen just before the financial crisis, there is clearly an issue between the Fed's view of full employment versus the "real" economy. The next chart shows the ratio of total employment versus the working age population back to 1977. There are two important points to note: 1) the ratio has been declining since 1999 as productivity gains, and outsourcing, has reduced the need for domestic employment, and; 2) the last time the ratio was at 56% was in April of 2009.
This data suggests that the "real" economy is far from achieving actual full-employment levels that absorbs the excess "slack" in the labor force, increases wages and leads to organic economic growth. The risk that the Federal Reserve runs by potentially increasing interest rates too soon is that higher borrowing costs will likely fracture an already fragile employment market as businesses currently only as necessary to keep up with incremental demand created by population growth.
"Baby Boomers" Are All Retiring?
Ms. Yellen did try to argue against the extremely low levels of labor force participation by stating:
"Labor force participation appears weaker than one would expect based on the aging of the population and the level of unemployment."
There have been numerous discussions about the number of "baby boomers" that are retiring in droves each day which is upending the labor force participation ratio. As shown in the chart of employment-to-working-age-population above, the decline that begin in 1999 is hard to justify by a "retiring" group of individuals for a couple of reasons:
- Given recent studies that suggest the roughly 50% of Americans have less than $2000 in the bank, there is little evidence to support that a massive number of people are actually retiring, and;
- After two major bear markets that destroyed a large chunk of the retirement savings plans of individuals there are many that have returned back to, or continue in, the labor force to supplement retirement welfare.
As I addressed recently in "Don't Blame Baby Boomers For Not Retiring,"
"Let's start with the retirement of the boomer generation. Recent statistics show that the average American is woefully unprepared for retirement. On average, 40% of American families are NOT saving for retirement, and of those who are, it is primarily about one year's worth of income. Furthermore, important to this particular conversation, one-fourth of those at retirement age postponed retirement with only 18% being confident of having enough saved for retirement."
"With 24% of "baby boomers" postponing retirement, due to an inability to retire, it is not surprising that the employment level of individuals OVER the age of 65, as a percent of the working age population 16 and over, has risen sharply in recent years."
What seems to be missed by the majority of employment analysis, in my opinion, is whether the economic viability for the average American has improved? The fact the social benefits as a percentage of real disposable incomes has risen to an all-time record certainly suggests that it has not.
The actual state of employment in the U.S. is likely far weaker than the economic statistics currently suggest. If this is indeed the case, it creates a potential for policy mistakes that could have negative consequences to both the economy and the financial markets.
While the Fed is "committed to policies that promote maximum employment" there is little evidence that the trillions of dollars injected into the domestic economy have had any real effect on improving employment beyond what would have been expected due to population growth. While the Fed has inflated asset prices to the satisfaction of Wall Street, it has done little to improve the economic prosperity for a bulk of the middle class.
Janet Yellen was correct when she suggested the "fiscal" policy was dragging on economic growth. Fiscal policies provide the capability for business increase production, raise wages, and boost employment. However, what businesses want is fewer regulations, which increase costs and reduce efficiencies, while government officials keep piling on more.
As I stated in yesterday's missive:
"Most importantly, the number of times that Federal Reserve has hiked interest rates without a negative economic or market impact has been exactly ZERO."
This time is likely to be no different.
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we're smart enough to see through the bullshit so... so are they. she's not misled, she's lying like the butch woody allen sounding bowl cut wearing globalist stooge she is.
So as this madness continues to "evolve" it has occurred to me something profoundly terrifying is occurring in America and Europe!!
We NO longer live in a solidified economic and political structure, and we sure as shit, DONT live in a free market, entrepreneurial capitalist system, instead what we have happening simultaneously is, Socialism (State Euro style) for some, fascism for some, and Obligarchy for some!!
The elite are benefitting from this "hybrid system" and the rest of us are suffering under it!! With the middle class taking the short end of the stick on all three dynamics!
Obligarchy has been around since the end of the 19th century, and Fascism made its rise post WWII, but this Euro Socialist bullshit is the newcomer and almost totally a byproduct of the Clinton/Bush/Obama era!! But it's ALL alive and well in 2014, living together like a sick disease on the citizenry of America
Yellen confirmed this notion before Congress, several months ago, when asked by a Congressman, "in your acedemic professional opinion, what is this economic system we are living in, what do you call this"?
Yellen replied "I have no idea, Congressmen!"
Well Mr(s) Yellen, if you fucking don't even know what it is we are living in, how the fuck do you think you have any chance of "controlling" the fucking outcomes of it, like you and CNBC tell us every day, you can????
If you dont think Obama care was planned in part for this purpose you are kidding yourself. Create more and more dependency on the state.
The Dems are casting Hillary as too conservative.... The repubs will throw up another brick Crusty or Ryan most likely, and the rest as they say will be history....
(sarcasm) 'oh no, i'm sure yellen is really on the case'
If only Stalin knew...
Canadian Dirtlump is absolutely correct---this globalist whore and her puppeteers know exactly what the real unemployment rate is and they also know full well the havoc their destructive policies are having on the masses. These globalist sociopaths hate humanty and are enjoying destroying the social order and free markets and anybody that asserts that Yellen's actions are misguided or due to incompetence should look in the mirror because they are either incompent themselves or useful idiots.
Is Yellen Being Misled By Employment Statistics?
The problem with lying and bullshitting all the time is that you have to keep track of all the lies and bullshit.
the NSA records every thing I do and all I got was this shiity double post.
Those who are "awake" as most of us here are really have a show to watch. The federal reserve lying through their teeth provably, while obama lies through his teeth provably on every matter foreign and domestic, as do the state department representatives meanwhiel on every geopolitical war front the US ( and all western coutnries for themost part ) take the wrong side and peddle provable lies.
You couldn't trust one of these demons to tell you the date in a calendar factory.
These fuckers need to be sent to the nearest gym / gallows.
The economic statistics (lies) we use in our centralized planned social paradise will soon become a victim of its own success.
The problem is that it's much easier to conceal than reveal. Statistics will be manipulated and misinterpreted even when reality smacks us in the face. Everything will be burried under a pile of horseshit and the history books will aim to make it stick.
It's far more likely that Yellen has a hand in creating false statistics on inflation and employment to retain confidence in the US dollar and the apparent unending strength of the American economy. This game has been going on for decades:
http://www.shadowstats.com/alternate_data/inflation-charts
http://www.shadowstats.com/alternate_data/unemployment-charts
"This game has been going on for decades:"
That alone is proof of something!!!
No, TPTB change the metrix with the leadership. Bernank says UE is key; Yellen says sumtin else. The pea is under a different shell.
Another article that starts off with an incorrect assumption.
Why is it that people even entertain the notion that any of them are working for us?
They aren't.
pods
Cuz... OMG you might be considered a "conspiracy theorist" otherwise!
The amount of trust the sheeple put into the facade of governance is astounding. Pick any 'non-tinfoil' site on the net, and just look at the comments. Divide and conquer at its finest.
RE
The People need a laugh?
The thing is, the Wall St "pundits" will say part of this is structural due to the baby boomers retiring; they are going to be completely blind sided when this thing comes burning down and then it will be *I* who has a good laugh.
I love how we've somehow lowered the bar for employment levels/population in America and that this gets celebrated by the corporations and the government. Really striving for achievement here, guys!
Janet will Gnomesplain everything when we're ready and not before
the participation rate is deplorable.
Yellen uses a ponzi crystal-ball to ferret out what to do. That and calls from her Rothschild handlers.
"The risk that the Federal Reserve runs by potentially increasing interest rates too soon is that higher borrowing costs will likely fracture an already fragile employment market as businesses currently only as necessary to keep up with incremental demand created by population growth."
"Most importantly, the number of times that Federal Reserve has hiked interest rates without a negative economic or market impact has been exactly ZERO."
So, it appears the author's true agenda is to keep the ZIRP gravy train rolling down the tracks. If that is the case, I have an investment involving long drops and short ropes that Lance should carefully evaluate.
Understandable if you live in the Ivory Tower and your man servant and body guards go for the groceries, gas and whatnot.
However, if you are a normal working stiff you notice things like when I leave my building at 5 am that mine is the only car leaving a 50 car garage for a long day at the office. I.E. very few people seem to be working.
You would also notice a great deal of stress and low brow behavior of the folks you work with as they seem to be under more stress than usual (I assume trying to make ends meet with a good 10% commodities inflation and a depreciating currency).
You would also notice empty store fronts. Things like the local 1500 layoffs at MickeySoft that don't usually happen around here.
There really is such a thing as the 'belt way bubble'. That is not reality in DC.
I am seeing huge amounts of stress related activities, not just in the workplace. It is everywhere.
I think that is why certain entities purchased lots of bullets
Zot..Zot..Zot..
Are you awake yet?
http://www.youtube.com/watch?v=P9VhiTY3mEw
"I.E. very few people seem to be working."
90 million plus dropped out of the "workforce tabulation"
No housing statistic seems to be counting the people who now live with relatives and friends or are camping after moving from foreclosed on homes or evictions.
When your government lies to you, it is time for a change.
But of course the Fed's ancient models are inaccurate. Why would they have cared to update the structure when everything was cantering along at profitable pace for decades! Why fix what was never broken?! Ha
It is now obvious to everyone, Fed numpties included, that there are literally millions of people, and billions of dollars of economic (in)activity that is unaccounted for. It's a pitty the Fed is showing it's self to be such an unscrupulous institution as I have been working on a modelling system that uses factual variables and a series of identifiable ratios that, IMO, would become quite intuitive, if not down right predictive of economic activity.
Alas information is power and considering misuse of what power the Fed already yields, I'm afraid Janet, that you will not be privy to this instrument of mass construction.
Mark these words the Fed's days ARE numbered. I know this as it was depicted in bright pink on the side of a rail car. The signs of the times.
I guess they stopped counting all the college gradutes since 2008
Employment is great. The economy is great. Obama is the best. Now please end QE and raise interest rates above inflation. Thank you.
"Is Yellen being misled" implies that the Ponzi Munchkin does not know what is going on and is getting bad advice.
I say that Yellen is political, and like any politician (regardless of what party), she only looks at charts/information that supports her Keynesian mandate.
http://en.wikipedia.org/wiki/How_to_Lie_with_Statistics
SMILE AND LIE,
that's all she'll do, bank on it, she's the face of evil, she's a female Bernie Madoff, she probably knew Madoff quite well, maybe even lived in the same building and donated to the same "charities" as Lois Lerner.
Since the correct "policy move" is get the fuck out, I rather hope she misinterprets the data.
Are you kidding!? The first rule is don't breathe your own exhaust. The Fed may be corrupt, but they aren't stupid. They know exactly how fucked up things are, but they think they can control us by telling us everything is OK. They may be smart, but they have no idea what to do, so that's all they have left: keep the unwashed masses clueless so they don't panic and start rioting in the streets.
This is a giant juggling act trying to keep the US Empire alive week by week. But when the dollar finally goes, the Empire will go with it. We can only hope the military doesn't try to keep it going by force. The US Empire was accepted as a necessary evil by the rest of the world, and they got global prosperity and Pax Americana in exchange for acquiescence. But without the dollar, Pax Americana devolves into military bullying. The world will simply opt out of that (it already is). This is going to to be bad enough for the US as it is. If we try to preserve it by force it will only make it worse.
People like Yellen are just beginning to realize that the jig is up, and we are entering a new world distopia (NWD). They know it will be much less propserous and much more violent. These people are in full panic mode, hoping beyond hope they can salvage the status quo. But it's already too late.
Negative policy mistakes? It is enevitable. Bring it on. Economic recession and deflation.
Employment is a lagging indicator, by four to five quarters....