I’m currently working on a paper on the social costs of the Fed’s QE program, and there are many. However, in running my data, I came up with something that counters what the Wall Street Journal is saying about the July Jobs report.
The assumption is that unemployment (including U6) rose because the economy is doing so great now, that those people who have been sitting on the sidelines (presumably starving to death) for the last 5 years, all of a sudden want to jump back into the work force. The assumption is, therefore, that there are more jobs to “entice” labor.
There are two problems with this assumption: first is that there’s no way to accurately measure the long-term unemployed re-entering the work force. Even if there was an increase in the Labor Force Participation Rate (which there is not – really), how would anyone track such people? The second problem is that according to the data, the assumption just isn’t true.
Analyzing the raw data from the Bureau of Labor Statistics, there is absolutely no relationship between the Labor Force Participation Rate, and the number of job openings. There is such a non-relationship, that the R2 = 0.02. There is such a non-relationship that the regression is almost flat. Since 2006:
I use Job Openings as the independent variable because, after all, the “assumption” is that there are so many jobs now, people are flocking back to the workforce. It’s obviously not true. The LFPR dropped regardless of how many jobs there were.
This, in the end, is the assumption of nothing. Assuming that something exists in the vacuum of nothingness is what Friedrich Nietzsche was all about; and he was not that keen on the religion of economics.