Tweets from @inflation_guy on the Employment release, and added detail:
- It's starting to be almost comical: weak jobs growth (115k, though close to expectations with revisions)...but Unemp Rate falls to 8.1%
- ...again, although unemp fell it looks significantly due to fall in the labor force. Partic. rate fell to another new post-83 low.
- At a 63.6% participation rate, we're perilously close to 1970s standards. The low in the 1980s was 63.5% in 1981.
- ...and back in the 1970s, some women were still entering the workforce for the first time!
Here's a chart of the participation rate. It's really dreadful when you consider the secular increase was due to a broadening of the workforce. I doubt women are leaving the workforce in droves now - so in a real sense the current employment situation is worse than it was in the 1970s. So the government is doing a great job of pushing down the Unemployment Rate...by pushing people out of the workforce altogether.
Of course, at some level this is good news for companies, because the "industrial reserve army of the unemployed" is toothless. Pressure on corporate margins will have to wait since labor doesn't have the teeth to reclaim its share. That doesn't mean inflation is dead, though - margins can also expand simply by having prices of labor rise slower than prices of consumption goods. Remember: wage inflation results from, it does not cause, broad price inflation.
