This Economic Data Point Is A Bearish Signal

Because there were 916,000 jobs created in March, the unemployment rate fell to 6%. Goldman Sachs thinks it will end the year at 4% which is full employment. In order to catch up to the job growth trajectory before the pandemic, the economy needs to create 10.6 million jobs. There are 8.4 million fewer jobs now than there were in February 2020. The economy probably will create over 3 million jobs in the next 3 months which should put a dent in those totals. We just started the 2nd spike in job creation. The vaccine distribution is going so well that the 7 day average of deaths in America has fallen to 818. That’s the lowest since October 20th. Outside of the first few weeks of the pandemic, the lowest is 524.

The labor force participation rate increased from 1 tenth to 61.5%. It ended the last expansion at 63.3%. It’s very unlikely to get back to that level ever again because the population is aging. Many older Americans left the labor force permanently last year. We’re seeing signs that it won’t fully recover in the last few months of data. The post-recession peak is 61.7% in August 2020. We’ve lost ground in the past 7 months. This rate will probably get above 62% in the next few months.

The prime-age labor force participation rate rose 2 tenths to 81.3%. It’s still below its post-recession high of 81.5% in June of last year. It’s remarkable that all the jobs created since then didn’t increase this rate at all. The pre-pandemic level was 82.9%. We think it will make nearly a full recovery in the next few quarters. As you can see from the chart below, the prime-age employment to population ratio is 76.8%. It’s dramatically closer to recovering than it was at this point the last cycle. The last cycle hadn’t even found a bottom at this point yet.

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