The US labor force participation rate is biggest question facing the Fed today. If you’ve listened closely to Bernanke’s comments over the last year they have been wishy-washy. At times he’s said it’s mostly due to demographics and an aging workforce but at other times he’s said a significant part is due to discouraged workers giving up.
It’s time for the Fed to lay its cards on the table and say what it believes a healthy participation rate is.
From where I stand, participation isn’t even close to healthy. It’s so far from healthy that the 6.7% unemployment rate is a complete joke as a measure of the jobs market.
We’re back to 1978 levels of participation, when stay-at-home mom’s were the norm and a one-income household was plenty.
US labor force participation
One of the headlines from the jobs report today was that US unemployment fell below Canada. I can tell you that it’s infinitely easier to find a job in Canada but aside from anecdotes, this chart blows the idea of demographic changes out of the water.
Canada labor force participation
Here’s the kicker: Canadian demographics are worse than the United States. A larger part of the population is +55, +65 and +75-years old.
Canada has lost about 1 percentage point of participation since the crisis, the US has lost 3.2. Where does that put the true unemployment rate? About 9%.
