Breakout

The dirty little secret behind today's employment report

Jeff Macke
Breakout

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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