Fed Chair Jerome Powell proposed a methodology that factored in labor force declines due to Covid. I replicate the idea.

Powell Calculation

I discussed Powell's adjusted unemployment rate on March 2, in How Did the Fed Conclude the Real Unemployment Rate Was 10% in January?

As you can see, I came up with nearly the same chart via the methodology described in the above link.

Private Payroll Rise a Whopping 465,000

Earlier today I noted Private Payroll Rise a Whopping 465,000

The BLS put the official unemployment rate at 6.2% whereas the labor-force adjusted unemployment rate is 10.0%.

Labor Force and Projected Labor Force

The Wall Street Journal comments Better Job Market Not Nearly Good Enough for the Fed.

Given Powell's repeated comments regarding the labor force, I certainly agree.

By my calculation, the labor force is 5.8 million below the number Powell seeks, and 4.2 million below the February 2020 pre-Covid labor force of 164.4 million.

The labor force is a moving target. It has been on a steady increase at the same average monthly rate since the beginning of 2016. 

I believe Powell used a similar methodology or the charts would not align as much as they do. 

Fed Hubris

Although I agree with Powell that the unemployment rate is hugely understated, I disagree strongly with the Fed's approach to deal with it.

For discussion, please see Fed Hubris: Housing Prices Show the Fed is Making the Same Inflation Mistake