"The labor-force participation rate fell to 63.2 percent, a level not seen since Jimmy Carter was president. The failure of President Obama's policies are becoming clearer day by day."
- Kevin Brady, chairman of Congress's Joint Economic Committee
The latest good news from the labour market may be bad news for the Fed's Chairman, as U.S. officials are considering when to begin the widely-discussed tapering of its stimulus programme. On Friday figures showed the overall jobless rate fell to 7.3% in August, hitting the lowest since December 2008, while the economy added 169,000 jobs. However the drop in unemployment rate was provoked not by a significant improvement in the labour market, but as more people dropped out of the labour force. Hence, the labour-participation rate, reflecting the share of working people either holding a job, or even looking for a new one, stands now at a 35-year low. Therefore, when taking the jobless rate adjusted on the number of people out of the labour force, the indicators would surge up to 9% or even more. Moreover, there are now 7,911,000 Americans, who are working part-time, but willing to have a full-time job.
Digging under the surface, it might be concluded that much of the recent drop in unemployment rate is nothing but a distorted statistics on a back of Obamacare legislation that led to a massive jump in part-time jobs. While the Federal Reserve established the jobless rate as the lodestar for its policy, the true picture of the job market is much worse than it seems.
© Dukascopy Bank SA