The Unemployment Rate Continues to Decline

Category : Blog Client Pension on May 3, 2014

Unemployment lineApril’s job report had some rejoicing as the unemployment rate dropped to 6.3%, but below the headline number there was more than a little devil in the details.

I spoke with an individual last week who lost his job in 2009 and is now retiring i.e. he had spent so long looking for work he had bumped into retirement. That’s not a great way to reduce unemployment but with the boomers stepping out of the workforce it is probably a material explanatory factor. Decreases in unemployment are about more than just a number. The quality of jobs being created (“fix me a latte”) and participation rates (many job seekers are simply disappearing from the job market) are both important.

The problem with the current recovery is it has been very anemic and as a consequence stretched out for much longer than it normally takes to recover post a recession. We just had a big GDP miss too, although that was probably down to bad winter weather. It’s still a delicate economic situation and a slow grind so I wouldn’t expect the Fed to jump on the bandwagon any time soon. The mood will likely remain cautious.

All that said it is also worth putting this into a broader perspective. There is always something to be worried about whether its domestic unemployment and GDP, a fiscal deficit, interest rates, a slowdown in important international economies like China, or geopolitical risk like the Ukraine. The problem is that as a consequence the good times can often be hard to spot. So for the avoidance of doubt, when we look back it is highly likely that history will record that we are currently in them.

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