On the employment front, there is the proverbial good news and bad news.

Unemployment is falling. The four month period ending in March saw the biggest drop in  Unemployment in a generation:  Jobless dropped from 9.8% in November 2010 to 8.8% in March 2011. According to Bloomberg, that is the biggest four-month decline since 1983.

However, one segment of the labor pool remains stubbornly unchanged: Discouraged Workers. Despite employment’s gradual rise, there remains “substantial slack in the labor market,” and it manifests itself in the longtime unemployed, often people whose industries have departed the country for cheaper labor abroad.

This is an ongoing concern for the Fed, as revealed in recent FOMC minutes of their March 15 meeting.

As we have previously discussed ad nauseum, a sub-par jobs recovery is what is typical following a balance sheet/credit crisis. At least, that is what 800 years of data looked at by Reinhart & Rogoff suggest.


“The sharpest drop in unemployment in more than a quarter century obscures a simple fact: The jobs market still isn’t working for many Americans.

Some 6.3 million people have been out of work and looking for a job for more than six months. The employment-to-population ratio is lower than it was when the recession ended as companies have been slow to add to payrolls. And big sources of hiring in the past — government, health care and retailing — may not be able to reprise that role in the future.”

The Fed’s dual mandate — price stability (inflation) and employment — are often at odds with each other. Meanwhile, the ECB is only charged with fighting inflation. That is why they just raised rates a quarter point to 1.25%.


The Buggy Whip Conundrum (April 4th, 2011)

Discouraged Workers Stop Fed From Taking Comfort in Jobless Fall
Rich Miller
Bloomberg, April 11 2011

Category: Data Analysis, Employment, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Discouraged Workers: Different ECB/FOMC Policies”

  1. rktbrkr says:

    About half the decline was due to adjustments (-.4% in Jan alone) and monthly preliminary estimates are usually revised upwards with the headlines given to the better preliminary estimates. Just think about it some dry BLS revisions do as much for the reported unemployment rate as hundreds of billions of stim bucks.

    KISS – for jobs just track the US tax receipts like Trimtabs and for retail sales just track total sales tax receipts. Like Jim Rogers says “you can’t trust the gummint”

  2. rktbrkr says:

    Whoops, forgot an attach about Jan adjustments.When things are complicated very often they’re made complicated for a reason!


  3. Petey Wheatstraw says:

    We have undergone a structural transformation in our economy that will not support full or near-full employment.

    Inconsistent policies in an intertwined, global economy will eventually benefit one side and detriment the other. Regardless of the effects on employment, the interest rate hike by the ECB (without the Fed following suit), will accelerate currency, trade, commodity and social imbalances, globally.

  4. wally says:

    “…often people whose industries have departed the country for cheaper labor abroad”
    I call that ‘structural’ unemployment, but the term is not PC lately. Also, the people who created that structural unemployment have now been handsomely rewarded for doing so.

  5. DeDude says:

    Maybe we can persuade the house to give special tax-brakes to businesses that hire long-term unemployed people.

  6. DrungoHazewood says:

    My chronically unemployed brother in law finally got a job, and he’s making more than I do. Now he’s calling me a bum. Next up, my chronically unemployed nephew. At least he’s getting some interviews. Same as last year, but they suddenly stopped last April. It seems like his job interview schedule correlates to the stock market.

  7. budhak0n says:

    Want to know the “true” source of your ills?

    But this is a problem that’s darn near impossible to ever address. Plenty of people in this country have “jobs”.

    Very few actually do anything productive.

  8. rktbrkr says:

    Hard to incent companies like GE to hire long term unemployed when they don’t pay taxes anyway.

    We should target Japanese cos to set up production and assembly facilities here while they rebuild in Japan. Sadly Toyota, Sony etc will be able to build brand new plants quicker than we can identify vacant facilities here and fast track their startup.

  9. forwhomthebelltolls says:

    I realize that everyone wants to hand a concise label on the labor market but it simply isn’t that easy. We would do well to emulate what some other countries do in relation to training compiled with (or as opposed to) long term unemployment benefits.

    The fact remains that through the entire recession we had many (perhaps 5 million) so-called “orphaned” jobs. Yes, many were just posted and not filled and others were not filled due to geography and applicants being unable to move to the job. But the fact remains that most went unfilled because there simply aren’t enough people who know how to do the jobs to fill them.

    We’ll pay for a person to collect unemployment for 99 weeks until he/she finds work in “their field”, regardless of whether or not “their field” even exists anymore, but we won’t take half of that money and insist that people get trained in fields where there are jobs. There are countless potential partnership opportunities here for subsidizing training in return for work commitments on behalf of trainees as well. But for some reason, these types of mandates are politically unpalatable. I cannot understand it.

    This seems like a screaming win for the taxpayer, win for the employer and win for the American worker but no one wants to touch it.

  10. rktbrkr says:

    So we have a middle age unemployed 4 YEAR college educated worker who was making 80K and we offer them 3 weeks free training as a home health aid making 20K or they can take a 2 year associateS degree for an RN starting at 50K, how long should they search for another 80Kish job in their field? These are not easy decisions.

  11. DrungoHazewood says:


    Very true. I have to admit that I am a rent seeker, and now we’ve got people quitting dead end jobs to become day/swing traders. The guy who used to bag groceries at the local Kroger quit his job and has done really well. He even survived the swoon last year. A lot of houses were built, but that was the shadow labor market, and now the houses have plunged in value. On top of that, a lot those that were built were slapped up as fast as possible, and will begin falling apart in the next 10 years. I’ve seen some of these where the shower stall is coming apart, roof leaking, linoleum bubbling up. And all the things BR has written about. No wonder we’re sucking wind.

  12. ironman says:

    What we’re seeing right now in the rapidly falling unemployment rate over the last four months is the result of the extended unemployment benefits for people impacted by the auto industry’s layoffs in late-2008 and early 2009:

    From Economic Crisis to Statistical Adjustment

    In a nutshell, to be eligible receive unemployment insurance (UI) benefits, people who have been laid off must claim to be seeking work. Once their eligibility to receive UI benefits runs out, they no longer need to claim they’re seeking work, which is why they’re no longer being counted as being unemployed, as well as being part of the U.S. labor force if they are no longer seeking work (they’re “discouraged”.)

    That change affects both the numerator and denominator of the U.S. unemployment rate calculation, however it affects the numerator more, which is why the unemployment rate can appear to be falling, even if no material change has taken place within the U.S. employment situation.

  13. vader says:

    Lets assume that 80K fellow has a load of debt. That debt was created assuming a 80K job and the payments on that debt exceed the income from a 20K job. In short the fellow works the 20K job and gets nothing. If he has a kid or two and no healthcare, a 20K job is slow starvation vs fast starvation. After car costs and other expenses, food banks and odd jobs may be about the same as a 20k job.

    Worst if the 20K jobs have 5 folks applying for them.

    Retraining is a fraud in the main as the folks that have to plan for it, plan for the jobs that were around at the time the training started, not when it ends when lots of grads go after a few jobs.

    The one and only way out is for there to be a lot of help needed, will train jobs out there. It has happened before. Getting there will be a challenge. The political environment is not going to help as I understand it, 100% of the time when the govt cuts spending during a recession or weak recovery, business falls off and UE increases.

  14. forwhomthebelltolls says:


    Not suggesting, for an instant, that these are easy decisions. They are not. But I will say that the example you’ve cited (80k, 4 year educated) is not the norm. The statistics suggest rather that 4 year educated unemployment percentages are half or less of those non-college educated.

    Look, during a housing “boom” every male with a pickup truck and a magnetic sign has employment. When the music stops, most of these unemployed are damned near useless to the labor market unless they get trained to do something else. Do we invite them to suit around and collect until the next bubble, or do we incite them to do something else which can provide them a paycheck today? I realize this seems like an oversimplification but in enormous number of situations, it is not. it is the reality.

  15. rktbrkr says:

    Vader, even removing debt from the picture nobody making 80K a year is saving 60K or likely saving 30K if they only move down to the 50K job. So really major life style changes are required – sell the house and car and get an apartment near a bus route type decision, so a long but unsuccessful search for a job that isn’t coming back is understandable.

    If you can’t fill a job in this environment it probably isn’t worth having, there are tons of home health aid jobs available that require training and certification and often a private car – and only pay a couple dollars more than a burger flipper or supermarket cashier, I’d rather scan diapers for 8/hr than change them for 10/hr.

    I think this drecession is fundamentally different, there are a lot of 40-50-60 somethings who are going to have to fundamentally ratchet back their life expectations and the monthly mullarkey from the government doesn’t mkean much to them

  16. ES says:

    FED cannot do anything about structural unemployement because it requires actually doing something, not just adding zeros on a computer. All FED does is smoke& mirrors, apeparances, moving money aroud, reallocating it. It has little effect on the actual productive activity beoynd making credit more easily accessible. Plus, often it goes too fart and actually hurts the productive economy by misallocating resources and creating booms and busts.
    Easy money created a bubble in housing and a lot of construction jobs but did it cure the underlying problems o the US labor becoming uncompetetive? No. It only masked a problem, let it fester and now it is much worse.

  17. Transor Z says:

    In the House of Lords the bill [granting a monopoly to the South Sea Company over Spanish colony trade in S. America] was hurried through all its stages with unexampled rapidity. On the 4th of April it was read a first time; on the 5th, it was read a second time; on the 6th, it was committed; and on the 7th, was read a third time and passed.

    Several peers spoke warmly against the scheme; but their warnings fell upon dull, cold ears. A speculating frenzy had seized them as well as the plebeians. Lord North and Grey said the bill was unjust in its nature, and might prove fatal in its consequences, being calculated to enrich the few and impoverish the many. The Duke of Wharton followed; but, as he only retailed at second-hand the arguments so eloquently stated by Walpole in the Lower House, he was not listened to with even the same attention that had been bestowed upon Lord North and Grey. Earl Cowper followed on the same side, and compared the bill to the famous horse of the siege of Troy. Like that, it was ushered in and received with great pomp and acclamations of joy, but bore within it treachery and destruction. The Earl of Sunderland endeavoured to answer all objections; and on the question being put, there appeared only seventeen peers against, and eighty-three in favour of the project. The very same day on which it passed the Lords, it received the Royal assent, and became the law of the land.

    It seemed at that time as if the whole nation had turned stock-jobbers. Exchange Alley was every day blocked up by crowds, and Cornhill was impassable for the number of carriages. Every body came to purchase stock.

    -Description of the South Sea Bubble from Charles McKay’s Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, 1848.

    Except unlike the unwind of the current crisis, corporate directors and government officials involved in creating and touting the Bubbles actually went to jail in the wake of the South Sea Bubble crisis. Aislabie, the Chancellor of the Exchequer resigned and went to jail:

    During all this time the public excitement was extreme. We learn, front Coxe’s Walpole, that the very name of a South-Sea director was thought to be synonymous with every species of fraud and villany. Petitions from counties, cities, and boroughs, in all parts of the kingdom, were presented, crying for the justice due to an injured nation and the punishment of the villanous peculators. Those moderate men, who would not go to extreme lengths, even in the punishment of the guilty, were accused of being accomplices, were exposed to repeated insults and virulent invectives, and devoted, both in anonymous letters and public writings, to the speedy vengeance of an injured people. The accusations against Mr. Aislabie, Chancellor of the Exchequer, and Mr. Craggs, another member of the ministry, were so loud, that the House of Lords resolved to proceed at once into the investigation concerning them. It was ordered, on the 21st of January, that all brokers concerned in the South-Sea scheme should lay before the house an account of the stock or subscriptions bought or sold by them for any of the officers of the Treasury or Exchequer, or in trust for any of them, since Michaelmas 1719. When this account was delivered, it appeared that large quantities of stock had been transferred to the use of Mr. Aislabie. Five of the South-Sea directors, including Mr. Edward Gibbon, the grandfather of the celebrated historian, were ordered into the custody of the black rod. Upon a motion made by Earl Stanhope, it was unanimously resolved, that the taking in or giving credit for stock without a valuable consideration actually paid or sufficiently secured; or the purchasing stock by any director or agent of the South-Sea company, for the use or benefit of any member of the administration, or any member of either House of Parliament, during such time as the South-Sea bill was yet pending in parliament, was a notorious and dangerous corruption. Another resolution was passed a few days afterwards, to the effect that several of the directors and officers of the company having, in a clandestine manner, sold their own stock to the company, had been guilty of a notorious fraud and breach of trust, and had thereby mainly caused the unhappy turn of affairs that had so much affected public credit. Mr. Aislabie resigned his office as Chancellor of the Exchequer, and absented himself from parliament until the formal inquiry into his individual guilt was brought under the consideration of the legislature.


  18. realgm says:

    The money that used to hire local Americans went into paying labour in the emerging market and the bonus pool of the senior management. It’s an easy decision to the CEO, instead of paying an average amercian of 50k in salary, he can pay 25k to a few workers in China, India, wherever cheap and pocket the 25k himself.