Read on Twitter
Thought bubble: when the Fed was raising rates in 2015, under the guise of inflation pre-emption, maybe it underestimated how much slack there was in the labor force. See this chart /1
The way I see it, there’s zero chance labor force participation declines so abruptly solely due to an aging workforce. People have been dropping out of the workforce. /2
That means the headline unemployment rate doesn’t capture how much slack there is in the labor market. 3.5% unemployment with a declining participation rate is not the same as 3.5% unemployment with a steady or rising participation rate /3
Finally, the concept that an unemployment rate can be “too low“ is perverse, when used as the premise for policy action. It effectively means you’re raising rates to throw people out of work - in order to preempt inflation /4
That’s what I told @AshBennington on Friday. https://www.realvision.com/shows/daily-briefing/videos/daily-briefing-august-28-2020?source_collection=8e80b18fdb074555bdd47d97e73fbe91 /end
Addendum: In no other advanced economy (whose data I have seen) is there a labor force participation rate trend that looks like this. The precipitous decline is uniquely American.
The policy world we live in and its implications https://pro.creditwritedowns.com/p/the-policy-world-we-live-in-and-its?r=ezbt&utm_campaign=post&utm_medium=web&utm_source=twitter write-up for this thread and another related one
