Maybe Participation Trophies Could Revive the Economy

The November unemployment report included a typical assortment of good and bad news.

The good news was in the headline. The unemployment rate fell to 4.2%, well below the 70-year average of 5.8%.

The bad news is the participation rate. The rate has risen to 61.8%. This is above the pandemic minimum of 60.2%, but well below the pre-pandemic level of 63.4%.

This highlights the problem that millions of people are not interested in working.As Barron’s explanation: “Millions of people have been losing their workforce longer than economists and policy makers expected, face-to-face schools reopened, and generous unemployment benefits expired in the fall. I went against widespread expectations for a large-scale return to work. “

There is hope that higher wages and a record number of jobs will be pulled back to the workforce somewhat. However, the number of working-age populations who are not interested in working is a nuisance.

Low labor force participation means slow growth

The graph below shows the percentage of people who do not belong to the workforce as a percentage of the population.

Percentage of the non-labor population

sauce: Federal Reserve..

As a labor statistics bureau Note: “People who are neither hired nor unemployed are not included in the workforce. This category includes retirees, students, those who care for children and other family members, and those who are not working or working. Includes people who are not looking for a job. “

Many of these individuals have lost their workforce for good reason — probably all — but they are still a concern for policy makers.

Currently, 30.4% of the population does not have a workforce. NS Economy The sum of the economic production of all workers. Non-workers slow down the pace of economic growth.

Over time, the economy should be able to adapt to a higher percentage of potential workers on the sidelines. But that can take years. In the short term, this will hinder economic growth and increase inflationary pressures as production is as low as possible.

Policy makers need to tackle this issue, which is a challenging one.

Michael Carrteeth Editor True Options Master, One Trade, Peak speed traderWhenPrecision profit.. He teaches technical and quantitative technical analysis at the New York Institute of Finance. Follow him on Twitter@MichaelCarrGuru.

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