What Happened To The ‘Bring Everything Back’ Function?

Many, maybe most, are thinking and betting that this just won’t matter. Sure, it’s awful and painful for those going through it, but another thirteen-digit government intervention will right this wrong, and along with a smooth, efficient-running vaccination program it will all add up to normality mere months ahead. Bad today, all better tomorrow, not worth bothering about in the meantime.

If that’s the narrative, then American workers just aren’t buying it like many markets – including those in the Treasury market who shorted the long end hard not long after the BLS report was released this morning. Stocks are at record highs while the labor force shrunk yet again (though some of this month’s 406,000 decline is related to the population estimate discontinuity mentioned above).

The Labor Force Participation Rate (which includes the Civilian Non-institutional population in its denominator) dropped back to 61.4% in January – the same as in June last year. Going back to the previous February, the labor force contains somewhere around 4 million fewer Americans who have given up even looking for work because, given the trend, can you really blame them (corroborated by the continued decline in revolving consumer credit now extended into December)?

However, those 4 million who have come out the labor force also have to come out of the section of the labor force categorized as “unemployed.” Technically, they are neither employed nor unemployed. The net result is, as had been the case for years before COVID, an unemployment rate that keeps improving even though, by every other account, the labor market is doing no such thing.

This isn’t to say the economy is in re-recession, but at this point, that’s splitting hairs; everyone already got hit with the recession, remain stuck fast within it, so the issue is getting ourselves out of it before long-run damage, substantial, harmful, and irreversible loss to potential, is done. That’s where the time factor comes in.

And it’s not a new one – at least in 2021. When the horrifying prospect of significant long-term employment came up in 2010, 2011, persisting into 2012 and beyond, this had been an entirely new phenomenon. Ben Bernanke said QE was working, though he had to repeat the thing four times, the US, the Fed’s models claimed, was always just on the cusp of full recovery.

Yet (from 2010):

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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