By Wolf Richter, Testosterone Pit.com
“Labor market conditions are affected by a wide variety of factors outside a central bank’s control,”
admitted Richmond Fed President Jeffrey Lacker a few hours after the
employment report bounced around the world. Yet for years, the Fed has
proclaimed that the heroic motivation for its selfless money-printing
mania (QE) and bold zero-interest-rate policies (ZIRP) was the deep
desire to improve the unemployment fiasco for average Americans.
So the employment report
was mixed in the manner befitting these crazy times: 165,000 jobs were
“created” in April. March was revised up from a super-lousy 88,000 to a
still lousy 138,000; February was revised up from 268,000 to 332,000.
The unemployment rate dropped to 7.5%, from 7.6%, the lowest since 2008 –
and so we’re excited and go into the weekend celebrating.
Stock markets certainly did. The Dow and the S&P 500 hit all-time
highs. Exuberance about the report skittered around the world and
propelled the German DAX to an all-time high as well. There’s nothing
like a “better-than expected” though very lousy headline number to
amplify the power of the money-printing machines.
But there were some big fat flies in the ointment. Hours worked dropped
to 34.4 from 34.6 in March, the worst so far this year. And average
weekly incomes declined – the bane of economic growth. That persistent
trend has hollowed out the middle class and impoverished the lower
classes. Falling real incomes is a serious long-term problem in the US.
Then there is the difference between those considered “unemployed”
and those who just don’t have a job. Despite the lower unemployment
rate, an ever greater number of people don’t have jobs! That
ugly phenomenon shows up in the Labor Force Participation Rate (people
over 16 who either have a job or are looking for one, as a percent of
the total labor force). It peaked in 2000 at over 67%, then drifted
lower and crashed during the Financial Crisis. It continues to decline with surprising stubbornness. In March, it hit a record low of 63.3%, and in April, it remained stuck there.
“Workers are discouraged by adverse labor market conditions,”
Richmond Fed President Lacker said. It was an “obvious” reason. He also
saw some demographic developments at either end of the age spectrum.
Young people, for example, might have “difficulty finding desirable
entry-level jobs, a by-product of weak economic growth,” he said. But
even the participation rate for the prime working-age population has declined sharply! Lacker attributed this to “weak economic activity” and possibly “other secular trends.”
The broadest and perhaps most accurate measure of reality that the
Bureau of Labor Statistics offers is the Employment-Population ratio
(working people as a percent of the total working-age population). It
ticked up one micron to 58.6, still mired near the bottom of its range
since the Financial Crisis – lows last seen in the early 1980s. The
ratio had peaked in April 2000 at 64.7%! Those were the days of “full
employment” – the days before QE and ZIRP had any meaning beyond Japan.
The Fed’s money-printing mania started in December 2008, when the
Employment-Population Ratio was 61.0%. The ratio documents the enormous
success of the Fed’s policies with regards to the job market! Alas, QE
was never designed to create jobs, and it can’t. As Lacker admitted, the
labor market is “outside a central bank’s control.” What QE and ZIRP did
create were bubbles in the credit markets, stock markets, farmland,
commodities, even in pockets of the housing market. Jobs? Not so much [here is the bitter graph of QE, ZIRP, and unemployment].
Both, the Labor Force Participation Rate and the
Employment-Population Ratio, indicate that quite a few jobs have been
created since 2009, but those jobs have barely kept up with the growth
of the working-age population. Companies are hiring, but not fast
enough. The economy is growing, but barely. Yet interest rates have been
near zero – or below zero when inflation is taken into account – for
years, and the Fed’s balance sheet has quadrupled since 2007.
“In this situation, the benefit-cost trade-off associated with
further monetary stimulus does not look promising,” Lacker groused. “The
Fed seems to be unable to improve real growth.”
Preemptively, the Fed has started blaming Congress. That’s more
convenient for an infallible institution than admitting that its
policies have failed to resolve – because they were never intended to
resolve – the employment fiasco. In its minutes from the March 19-20
meeting, participants relentlessly plowed
into Congress’s fiscal policy that might be “tightening,” and they
pointed repeatedly at “fiscal restraint” and other deadly sins – despite
the trillion dollar deficit. They’re paving the way for the moment when
even officially it is clear that the pretext for handing out trillions
was just a pretext.
And here is a fun one: in theory, a class-action lawsuit allows the
little guy to stand up to a big corporation and seek redress. Alone, the
little guy wouldn’t have the means. Justice comes down to money, and
class-action lawsuits add leverage. In theory. In practice, that world-famous American product is infested with flaws. And it’s about to be imported by France! Read.... The Pleasures of Class-Action Lawsuits Slam Into France
Read More...
Related: Wolf Richter talks with Doug Owen of BlacklistedNews.com
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