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Rising Unemployment Is Just The Excuse The Fed’s Been Waiting For

  • Yesterday we got the first jobs report of the year and the way Wall Street and the media seem to be spinning it:
  • “It was a good report!”
  • It was good news because the headline number beat expectations:
  • We created 227,000 jobs in January vs the 175,000 that had been expected
  • Of course it was an improvement on the 157,000 jobs which was a disappointing report in December
  • But once again, if you look beneath the headline number, you’ll find that there are a lot more problems to this report than the media is reporting
  • First of all, as always, the lion’s share of these jobs are lower-paying service sector jobs
  • They’re in retail trade, leisure and hospitality
  • So we’re not creating the types of jobs that will Make America Great Again
  • In fact, if you look at the higher paying jobs – manufacturing, mining logging
  • These jobs are barely adding workers, if not losing workers
  • But the bigger story here has to do with what’s happening to labor force participation, wages and unemployment
  • The official U3 Unemployment rate went up from 4.7% to 4.8%
  • The more revealing U6 number, which I think paints a more accurate picture of the true state of the labor market
  • That went up from 9.2% to 9.4%
  • Even Donald Trump, when he was campaigning, said that that number was far more accurate than Obama’s official numbers
  • Why did the unemployment rate go up so much, considering that we had 227,00 jobs created?
  •  The reason was that we had over 700,000 workers re-enter the labor force
  • This goes against the trend that has dominated the entirety of the Obama administration
  • Where we saw a mass exodus of workers leaving the labor force
  • In fact, the labor force participation rate went up in January from 62.7% to 62.9%
  • First of all, why did so many Americans decide to re-enter the labor force in January?
  • Maybe there are 2 possible explanations and maybe they’re both accurate:
  • One might have to do with all the optimism surrounding the Donald Trump Presidency
  • Remember, Donald Trump campaigned that he was going to be the greatest jobs President
  • And it’s possible that a lot of people believe that this is going to happen
  • So they are re-entering the labor force to land one of these great jobs that President Trump will be delivering
  • You have to enter the labor force in order to apply for one of these jobs
  • Another reason is that the people who have been “sitting out” of labor force participation
  • Maybe circumstances are finally catching up with them, maybe they’re running out of money
  • Maybe the cost of living has risen to the point that they have to, by necessity, find a job