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News Flash: 5.5% Unemployment Rate Represents Full Employment
By EconMatters
3-5 Months Ahead of Fed Forecasts for Employment Levels
What has sort of gone under the radar recently with Ebola fear mongering, Europe throwing a tizzy fit until they get their ‘stimulus fix’ and everything is miraculously all well again, profit taking in front of earning`s season here in the US, and oil on one of its customary $20 trading range moves to the downside is that last Friday the unemployment rate dropped to 5.9% due to another robust employment report and several upward revisions to prior month`s reports. Yes we are in the 5`s for unemployment, well ahead of everyone`s forecasts including the Federal Reserve.
Fed Minutes after Incorrect Employment Report
It is great that everyone interpreted that the Fed Minutes were dovish, but the mistake is that this was after a dismal employment report, these minutes were based on old and incorrect economic information, and a Data Dependent Fed has some explaining to do now that the new employment data has come out last week for the economy.
But What About…
I know this is where the doom and gloom crowd who look at every glass as half full will point to the number of people who have left the workforce, or the under-utilization rate, or the quality of jobs created in the economy, or wages only being up 2% this year, or these jobs aren`t cosmic fulfilling to their ethos spirit.
Have You Seen The Jolts Chart?
My response to that criticism is the following data set from JOLTS data released this week showing there were 4.835 million job openings out there for all those who have either not been looking very hard for a job, have left the workforce, are not satisfied with their current job, or are seeking additional training to move into the workforce. This was the highest level of job openings since January 2001. The number of job openings increased for total private and was little changed for government in August. This is good for the economy the strength that we have seen in both the Employment numbers and JOLTS data the fact that the private sector is leading the way, and not burdensome non-market related government jobs which frankly act as a negative in my book considering their performance and compensation disconnect.
Read More >>> The Fed Can`t Raise Rates Because the Sky Is Blue
The Federal Reserve is Clueless
Thus this country has both created the most jobs this year since 1997, and has the most jobs still available since 2001, the unemployment rate is 5.9%, and by my standards full employment is the 5.5% level given historical standards in a normal, healthy economy and job market. Go back and look where the Fed Funds Rate was during times of comparable employment percentages for the last 20 years, throw in the fact the gas prices are finally coming down giving consumers extra money to spend on retail and discretionary spending during the Holiday shopping season, thus giving a boost to third and fourth quarter GDP numbers, the US economy is growing above trend, and there is no way in hell the Fed should still be stuck at recession era level of interest rates.
Read More >>> Is Janet Yellen Smarter Than Me?
What Comes After a Tightening Labor Market?
The amount of off-sides in the bond markets here taking advantage of ZIRP to borrow at essentially nothing and juice up bonds because when it costs nothing to borrow money any yield is a good yield in their book is setting the entire financial market up for major volatility in the massive getting back on-sides with the reality of a healthy economy growing above 2.5%.
I am sorry for the doom and gloom dovish free money for life crowd but use a little logic, the job market is tightening by any standards, we are growing above trend, and we are approaching by historical standards full levels of employment, what is the next shoe to drop in a tightening labor market reaching full employment, it is wage inflation and pricing power for goods and services other than petroleum products which have been overvalued for a long time given the fundamentals of the energy market. Make no mistake don`t be fooled by lower energy prices and its effects on inflation, giving a huge tax break to US consumers is actually after a slight lag effect, highly inflationary for overall prices in other categories of the CPI bucket, we are going to experience a sharp increase in inflation once these minimum wage initiatives start pushing through the system.
Read More >>> The Counterfactual Case Against ZIRP
Fed Dovishness Out of Control
I have never seen a more mismanaged Fed right now, Janet Yellen and the Doves snuggling up to her good graces are completely out of touch with the economic data and realities of the US economy. Furthermore, the latest ploy for those on Wall Street who want continued free money at any costs to long-term financial stability to the system are the same crowd that was buying subprime mortgages the last time interest rates were low chasing the same type of levered yield trades that time with securitized debt instruments, and this time with treasuries around the world. The can`t raise interest rates mentality because the dollar is too strong are myopic ZIRP sycophants, this is what happens when an economy is growing better than other economies, the currency appreciates against other currencies, and interest rates rise. Do any of these people have a basic understanding of economic, business and financial market theory?
Read More >>> Janet Yellen Is The Wrong Chairperson For the Fed
Liberalism at core of Fed Cluelessness
This is how economics work, this is a good thing to have one`s economy outperforming its peers on a globally competitive basis, to be entrepreneurial, create innovative products, better ways of doing things, paying higher wages because employment levels are rising, the job market is tightening, and by any normal measure interest rates should be following suit and rising as well regardless of whether the US Dollar also strengthens. This isn`t a new concept, the US Dollar has been strong before, and the Fed Funds Rate has been much higher. I swear these doves at the Fed are from this West Coast school of ‘Feel Good Liberalism’ at the expense of throwing all their economic principles out the window. These doves at the Federal Reserve are so left wing ideologues that they are basically risking the entire financial system, creating massive bubbles in most of all the bond markets that are going to end disastrously at this pace, all because of their social welfare mentality which is at the core of all of this ZIRP Nonsense.
But Look We Are Helping People Mentality
I finally figured out what is part of the core reason shaping this out of touch view by what are supposed to be trained economists, it all starts from academia, which is as politically correct and socialist liberal leaning as you can get stuck in the easy confines of protected walls of ‘Feelgoodism’. These people feel good about themselves if they are in their mind playing a role in giving something away, they are participating in the cause, even if it means being totally disconnected from economic reality and basic historical economic relationships that have held for decades, all along the way creating massive bubbles in financial markets that create more damage to the system over the long-term. It is the fact that in their minds they are ‘helping people’ by keeping interest rates below healthy levels, and the big banks are more than willing to accept the free money, they sure the hell don`t give a damn about the long-term. The big banks and financial institutions will never say NO to free capital.
The Federal Reserve Should Not Be a ZIRP Soup Kitchen for Financial Markets
Consequently Social Liberalism is really what has corrupted this Federal Reserve, and no I am not a conservative, in fact I have no political affiliation, other than maybe a person interested in price discovery and the beauty of free markets without Fed controlled manipulation of asset prices. But if these folks are going to let their politics interfere with basic economic reasoning and theory, then we need to start treating them like politicians and voting them in or out of office every two years.
And I would clean house with this Federal Reserve, they are incompetent, irresponsible risk takers with Monetary Policy, and with a 5.9% unemployment rate and a 25 basis point Fed Funds Rate, motivated by their ‘Feel Good Do Goodism’ liberal bearings have lost all objective economic reality! These people should have become social workers instead of objective ‘data dependent’ economists. The financial system doesn`t need any more ZIRP handouts to ‘fix’ things, or break things so that they can be ‘fixed’ again, what they need is for the Federal Reserve to get out of financial markets, return interest rates to more normalized conditions, and stay out of financial markets for good in terms of asset purchases. Enough of this Social Welfare Mentality for Financial Markets!
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Yeah, that JOLTS number...when 1 person has 2 part-time jobs, it is counted as 2 jobs. 1/3 of all jobs now are temporary, contractual and with no benefits as well: http://www.gramsgold.com/news/job-growth-dives-33one-third-of-all-jobs-t...
Wages are down 23% since 2008: http://www.gramsgold.com/news/wages-in-us-drop-23-since-2008
AND the US Ranks Number 1 in the Developed World for Low Paying Jobs: http://www.gramsgold.com/news/us-ranks-no-1-in-low-paying-jobs-and-125th...
It's not seeing the glass as half full. There ain't hardly nothing left in the glass that is the US economy. Wake up and smell the coffee, EconMatters!
And once the Feds stop screwing with the markets using POMO, the markets fall/normalize. So why was/is the Fed doing this? It is common understanding that the market indexes are measures of social mood - the higher, the better. It is also common knowledge that when markets stay up, US Presidents get re-elected. Trillions out the door to game the masses into believing that the economy is doing just fine and to re-elect a US President who's probably the biggest nincompoop in the history of US Presidents. Oh yes, and with the active participation of the MSM promoting all this bullshit, the process completes itself. All good until music stops. Expect much bigger swings in daily markets in the weeks ahead - hear that all you day traders? We need a close below 1900 to confirm this bear.
Obama is black! I think.
29 hours a week is the new full time.
Only a fool, dolt, or mutton head would believe U/E is under 13%.
Your acceptance of numbers without question, your trust that you are not being conned, lied to and hoodwinked is unacceptable. Therefore, you have a hidden agenda.
What might that be far more important than your lengthy propaganda piece.
You can attempt to downplay the numbers who have dropped out of the rat race, 'inflating' the U/E rate significantly, you can drink the Bamster admenstruation's love potion, and you can make decisions based on those fairy tales, but few here will believe one word of it.
Greg Hunter of USAWatchdog.com, in a September 1, 2014, interview with Economist John Williams, says “Williams says forget all the happy talk about the improving economy… ‘The economy is in severe trouble.’”
Excerpt:
On unemployment and the Obama Administration’s recent claim of creating “nearly 10 million new jobs in the last four and a half years,” Williams says, “If we were to go back to the levels before the recession, we would need at least 11 million new jobs. That’s 11 million more than we have now. . . . We are in serious trouble here.” You heard correct, the U.S. needs 11 million more jobs just to get back to the pre-2008 crash levels. . . . We are still losing jobs in this economic picture. That’s what the numbers are showing despite all the happy hype you get in the popular media.”
Williams is forecasting a possible dollar sell-off by the end of 2014. Williams predicts this will trigger the beginning of hyperinflation. Are we on track for this prediction? Williams contends, “Everything the Fed has been doing to pump this extraordinary amount of liquidity into the system since the panic of 2008 has been aimed at propping up the banks. . . . The banks are still in trouble. From here on in, it’s going to get worse, and as it does, the Fed is going to have to pump more liquidity into the system. . . . They will use the poor economy as a political shield. As the economy turns down . . . the Fed has to do more, and all these factors will come together in a great confluence, and that will give us selling pressure in the U.S. dollar. With this selling pressure, there will be upside pressure on commodity prices, and that will be the early trigger for hyperinflation.”
On the issue of bank bail-ins, will they happen? Williams says, “Nope, the Fed’s basic mandate is to keep the banking system afloat. I can’t envision a Fed that would want to see people losing their money because of what it does to the banking system. The problem with depositors bailing out the banks is that it encourages bank runs. It’s the run on the banks that the central banks have to avoid. . . . I doubt they would take actions that would trigger a big run on the banks.”
So, instead, Williams says the Fed will just keep printing money to keep the banks afloat.
http://usawatchdog.com/economy-in-severe-trouble-john-williams/
Incredible. They've achieved full employment just before the elections.
I'll be sure to vote for them. Right.
Arrest Loyd Blankfein and Diane Feinstein for treason.
In the New Abnormal rates would have to be at 10% for a fudged unemployment at 5.5%.
I've been watching for econmatters in the obits. Thought that tbond short might have killed you by now.
I recall at UC Berkeley being schooled in similar drivel - that low unemployment means that interest rates should rise. But then the reality of the Bill Clinton years showed that to be just more silly dogma. And aren't folks due a wage increase?
"My response to that criticism is the following data set from JOLTS data released this week showing there were 4.835 million job openings out there for all those who have either not been looking very hard for a job, have left the workforce, are not satisfied with their current job, or are seeking additional training to move into the workforce. This was the highest level of job openings since January 2001."
It doesn't really matter how many job openings there are, if they are not being filled by those doing the hiring.
"News Flash: 5.5% Unemployment Rate Represents Full Employment"
If we were in a world in which the true unemployment rate was 5.9% and heading to 5.5%. However, a new record 92.6 million were not working, according to the latest report. Thus the true unemployment rate is much higher than 5.9% and will still be if it reaches 5.5%.
EconMatters = Leo Kolivakis?
I agree with the writer's opinion of the idiocy of the Fed and its members and their motivations. But the idea that the employment market is even somewhat fixed is absurd. I hope he is using their (flawed) interpretation of the unemployment situation in America to show the inconsistency of their policy stance (and doesn't actually believe that), but I frankly didn't read the whole thing because of this appearance of support for that take on the US labor market.
Full employment ... hahahahahaha
I've got my spoon on my nose
These are not good times ... and ... the problem is I do not see them getting better.
Why? Success is no longer left up to the individual.
"The essence of a credit-expansion boom is not overinvestment, but investment in wrong lines, i.e., malinvestment."
-Ludwig von Mises
"It is much less about the number of available jobs than the purpose those kinds of jobs serve in society."
-Ewtman
what a load of propaganda. look at the 90+ million americans who have fallen out of the workforce all together, and the amount of new jobs that are part time jobs, and the people who are holding more than 1 job.
this dead beat serving up the koolaid.
i hope you are all ready for the next round of stimulus from queen dove.
eCONomatters. utter bs, sounds like 0blahma cheerleader.
Agree. The participation rate and jolts data point to two obvious conclusions: 1) skills gap, and 2) govt. handouts are worth more than the majority of job openings being posted. Thus the reason that both parties are eager for amnesty. The illegals are needed to fill the jobs that free loading Citizens will not take. Ironic that for a while the new citizens will make sure that social security checks clear for all of the liberal baby boomers longer than the ponzu scheme should.
My kids love their grandparents, but they also know that grandpa and ma really ass fucked their future. They are smart kids that have adopted our prepper life style and know the game will be over in their lifetime. So they function at a high level by day but pray it all goes to hell sooner rather than later.
All govt data and govt itself is manipulated by the global elites.
There fixed the author's wrong point of view.
I have thought for a while now that the encouragement of legal and illegal imegration by both the "parties" was due to, in part, to continue funding SS.
Good thinking mate.
True unemployment 5-10%
True unemployment >15%
This clown is obviously a cheerleader for the government. We're at full employment? He must be smoking crack! The Jolt numbers are up? The idiot should consider that one when you have almost a third of all Americans (i.e. 94 million) who have stopped looking and all the overwhelming jobs that are being created are minimum wage jobs that yes jackass, unemployment will appear to go down and job openings will appear to go up. Look at the average income numbers for americans to get a better picture of what's going on.
Expect a whole tent-full of clowns in the run-up to the election....
I dont know how they count employed in the US, but in Australia if you work one hour a week you are classed as employed.
Wow! did ECONMATTERS get trashed over this article here, back to the comic books I guess.
Ha Ha Ha, this is a joke right? If interest rates rise what is .gov going to do? What the heck will Portugal and Spain do if they can't issue debt at all time low interest rates? Will the no-doc liar car loans have to stop? Will stock buybacks financed by cheap debt issuance have to stop artificially inflating eps? I don't think this guy has considered all the ramifications of an interest rate rise, or the fact that any BLS information is BS. I think there will be some pressure washing jobs opening up in the near future, maybe this guy should apply? After all that other government agency the CDC said Ebola is hard to get.
Ha Ha Ha, this is a joke right? If interest rates rise what is .gov going to do? What the heck will Portugal and Spain do if they can't issue debt at all time low interest rates? Will the no-doc liar car loans have to stop? Will stock buybacks financed by cheap debt issuance have to stop artificially inflating eps? I don't think this guy has considered all the ramifications of an interest rate rise, or the fact that any BLS information is BS. I think there will be some pressure washing jobs opening up in the near future, maybe this guy should apply? After all that other government agency the CDC said Ebola is hard to get.
The good news (although technically illegal) is that there may be an underground U.S. economy amounting up to 4 trillion dollars operated by unemployed and partly employed Americans surving from doing everything from flea market and garage sales to landscaping, carpentry and innumerable other under the table type activities. They may still get cash back (quite a bit I hear) from the IRS which does not investigate very thoroughly.
The tax savings are considerable but they will not be given SS credit at retirement. Despite being "jobless" they are freer than most people. As long as they dont get caught.
Drug sales, prostitution, smuggling in illegal aliens, all good cash businesses.
give every $ the vote.
https://www.academia.edu/8729492/Smart_Money
This will solve all your problems by giving you 1000 times more
From now on you will have to include the $ .
https://www.academia.edu/8729492/Smart_Money
An unemployed dollar ? Does it qualify for the dole ?
5.5 = 0
DEFEND NOW
5.5? Are we telling jokes now? 48 mill on welfare, right? No wage growth, actually contracting wages since 08 excluding 10% the way it's figured is changed frequenly. Participation rate dropping off cliff...need I say more...stop drinking the koolaid. It's gonna end like jonestown...the bonds that back this all up are leveraged up. 2008 was nothing! Not to mention the sour taste left throughout the world when 50 trillion got cooked in 18 months...dollar is losing support...debt is vertical...tax Rev contracted this year with spending up...entitlements about to crush us with boomers...facebook has market cap over 200 billion? Really...Wake up!
Are you fucking kidding me? C'mon this is really an Onion piece, isn't it?
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THIS STATEMENT SHOULD READ:
WE WANT TO BE LIKE ZERO HEDGE EXCEPT OUR AUTHORS ARE LYING LIBERAL PROPAGANDA SPREADING SUCK ASSES.
Job market tightening? Wow, you are full of shit. And 'full employment' is a 0% unemployment rate and employers begging, with raises, and with overtime, people to work harder and smarter. With large investments in plant and machinery to make that happen. The current rate, doctored as it is, in no way represents the extreme amount of labour slack that's out there.
notext
5% is generally accepted as full employment. Consider the friction of changing jobs. I.e., one or two weeks off before starting new job. As for the article, I would appreciate the U6 rate quoted too anytime unemployment is discussed.
Leaving aside the matter of the labour participation rate, and how 'employment' is actually measured, 5% is nowhere near 'generally accepted as full employment' by any competent and honest economist. True full employment is 0% unemployment, ie: nobody actually reports themselves unemployed when they move to a new job because there's no involuntary gap between the ending of the previous employment and the taking of new employment. In such an environment, employers obviously would be flexible about starting dates, vacations, etc. Something we're eons away from in the contemporary labour market where most new grads have seen dismal job opportunities for at least the past decade, and even top talent has their applications/resumes ignored by the employers. Without substantial investment in productivity-improving technology and industrial re-capitalization, there cannot be anything resembling full employment in the economy.
that certainly makes sense to me. in every economic textbook they teach the 5% bs. i didn't think to question it!
i would end the fed and reurn the econ to a market based econ. money would be limited to tax receipts, with ebb and flow overides to smooth the expansion and contraction of normal econ.
markets would be regulated by non participants and politicians would have term limits. money out of politics except 100/ entity per year. exon mobil = you or me...
a fuckit, will never happen, shit sucks, or should be saying people suck, ha...
Woo, hoo!!!! The Dear Leader Obama "recovery."
NOT!!!!
Millions fewer jobs, scores more people on welfare (over 100 million Americans receiving some sort of welfare benefits - this doesn't include Social Security), many more people on food stamps, incomes declining, health insurance rates doubling or more due to ObamaCare...
If we were all on welfare, having not bothered to look for a job, or given up looking for a job, we would have 0.0% unemployment. I believe it was Nancy Pelosi who said that more people on welfare is what really powers the economy.
My take-away from the article is that IF the "statistics" are as presented by the gubbermint, then why are interest rates where they are? This actually proves that everyone involved, from the POTUS on down to the Fed governors knows the real score. We are deep in this hole and the ones with the shovels just can't seem to stop digging. The regular working folks are just getting pelted with the dirt. All the "facts" should render a higher interest rate... but it's not there. The author forgot to point out that Mr. Market should be setting interest rates, not lackeys of the banking system.
I don't know why you claim the Fed is acting like "feel good liberals". I don't know of any liberal agenda that calls for enriching banks and big financial institutions at the expense of the common people.
It sounds like you are one of those who label anything you don't like as 'liberal'.
Stop with the left/right stuff already, it's a stupid distraction. Today we are dealing with 2 distinct types of people...Those who just want to do an honest day's work and live their little lives in peace, and those who think they have the right to skim their own livings off the value provided by the first group. Each group contains both liberals and conservatives.
The majority of the 1% are the commissioned officers in the Free Shit Army, you know. They might not eat in the same mess hall, but believe me, people like Mitt Romney and Lloyd Blankfein have more in common with Ms. Obamaphone than they do with anyone who works for a living.
Damn. I wish I'd said that. Can I steal your comments as my own? Nah, never mind. I do that anyhow. But I'll give ya kudos for being the first one I've ever asked permission. Consider that a compliment.
Well said
>>>Thus this country has both created the most jobs this year since 1997, and has the most jobs still available since 2001, the unemployment rate is 5.9%, and by my standards full employment is the 5.5%>>>>
You sir are a moronic asshole who isn't qualified to peddle shit, nevermind dispensing economic opinion.
"But what about..."
Yes, moronic asshole. That paragraph pissed me off. The jobs in JOLTS are CHURN.
Sure, I can go to the jobs board online and there are 875 jobs in my region and 80% are part time paying $9/hour or less.
The other 20% are full time paying $10/hour or less. All are CHURN jobs with 0 benefits.
CHURN = Hire 'em, grind 'em down, fire/quit in disgust, repeat.
EconMatters is not paying attention.
And the "liberalism" comment, oy.
Politics is the distraction!
"The job market is tightening, and by any normal measure interest rates should be following suit and rising as well..."
Seriously?
I stopped reading after this...
Anyone using the govt numbers for unemployment is underinformed.