Powell Calculation

An Economists Asked me How Did Powell

I discussed Powell's adjusted unemployment rate on March 2, in How Did the Fed Conclude the Real Unemployment Rate Was 10% in January?

As you can see, I came up with nearly the same chart via the methodology described in the above link.

Private Payroll Rise a Whopping 465,000

Earlier today I noted Private Payroll Rise a Whopping 465,000

The BLS put the official unemployment rate at 6.2% whereas the labor-force adjusted unemployment rate is 10.0%.

Labor Force and Projected Labor Force

Labor Force and Projected Labor Force 2021-02

The Wall Street Journal comments Better Job Market Not Nearly Good Enough for the Fed.

Given Powell's repeated comments regarding the labor force, I certainly agree.

By my calculation, the labor force is 5.8 million below the number Powell seeks, and 4.2 million below the February 2020 pre-Covid labor force of 164.4 million.

The labor force is a moving target. It has been on a steady increase at the same average monthly rate since the beginning of 2016. 

I believe Powell used a similar methodology or the charts would not align as much as they do. 

Fed Hubris

Although I agree with Powell that the unemployment rate is hugely understated, I disagree strongly with the Fed's approach to deal with it.

For discussion, please see Fed Hubris: Housing Prices Show the Fed is Making the Same Inflation Mistake

Mish

Powell Says the True Unemployment Rate is Actually 10%

Fed Chair Jerome Powell gave a speech today on the labor force and jobs. Let's tune into the discussion.

Unemployment Rate Dives as People Drop Out of the Labor Force and Life

The unemployment rate plunged to 6.3% from 6.7%. Let's investigate a peculiar reason why.

Powell Calls Rate Cut a "Mid-Cycle" Adjustment

According to Fed Chair Jerome Powell, this may not be the beginning of a rate cut cycle.

The Verge of "Overheating" Labor Market in Pictures

Economist Mark Zandi fears the tight jobs market may "overheat". In the Beige Book, the word "tight" came up 31 times.

Payrolls Expand by Whopping 312,000 as Unemployment Rate Rises to 3.9%

Nonfarm payrolls jumped by 312,000 and the unemployment rate rose by 0.2 PP as the labor force expanded by 419,000.

Payrolls Underperform Expectations at 155,000 Jobs, Unemployment Rate Steady

The unemployment rate was steady at 3.7% as the rise in employment was close enough to the labor force rise of 133,000.