MariasCap: Succinct Summation of Week’s Events 11.13.15 (+ 2 bonuses

As the unemployment rate continues to plummet, there has been much discussion by the cynics in the last few years of the so-called Labor Force Participation Rate. The argument goes as follows: the low unemployment rate is a complete fiction because the LFPR has also gone down, mainly because of discouraged workers who are too depressed about the lame economy to even try to look for work. Thus the real unemployment rate is closer to 10%, much higher depending on the demographic. This is the argument being used by those who wish to accuse the government of (charitably) using fuzzy math or (less charitably) being downright deceitful. This LFPR would not only include the drop-outs but also the underemployed, those who have been forced to accept jobs that pay far less than the jobs they held prior to the recession.

Of course, contrary to these accusations, the government has actually been quite forthright in acknowledging that the drop-out rate and underemployment continues to be too high. Never has it been suggested that we have reached our goal, only that we are making steady progress towards it. The critics never mention these inconvenient truths, only continue to point to this LFPR as proof that things are far worse than we've been told and that the so-called recovery has been a sham.

Today, one of our bonuses is an excellent article about the LFPR which explains exactly what it really is, how it is useful, and what it means in terms of the recovery. Is it really as bad as the critics say it is? The author makes a compelling argument that the answer is an absolute No! The author makes the case that the number of disaffected unemployed out there are only 1/4 of 1% of the labor force, not the 5 to 10% that the cynics would claim, that the decline in the LFPR has not been nearly as precipitous as believed, and that the decline is due almost entirely to a shift in demographics rather than discouraged workers. The specific shift in demographics referred to is the fact that far more baby-boomer retirees are choosing to remain retired than in prior history and that is why the LFPR has declined. That is also why it is not really a concern.

Bonus #2 is a quick 12 minute video from the master himself, an interview with the man who manages Barry Ritholtz's wealth management company. This is a rare opportunity to get it right from the horse's mouth how Ritholtz's firm operates and how its investment philosophies have evolved over the years.

And, of course, as always there is the end-of-week eye shot summarizing the recent pros and cons in the market. Hope everyone had a great weekend.

Succinct Summation of Week’s Events 11.13.15 | The Big Picture

Succinct Summation of Week’s Events 11.13.15

by Barry Ritholtz - November 13th, 2015, 4:15pm

Positives:

1. NFIB small-business index came in at 96.1, unchanged from the previous reading.
2. Bloomberg’s consumer comfort index came in at 41.6, up from 41.1 previously.
3. Retail sales ex-auto rose 0.4%, above the 0.2% expected rise.
4. Consumer sentiment rose from 90 to 93.1, above the 92 expected.

Negatives:

1. Retail sales rose 0.1% versus the 0.3% expected.
2. NFIB small-business index came in at 96.1, below the 96.4 expected and unchanged from the previous reading.
3. Import and export prices both fell m/o/m and are down 10.7% and 7.4% respectively y/o/y.
4. The MBA mortgage composite fell 0.8% w/o/w.
5. Initial jobless claims came in at 276k and the 4-week moving average rose from 262.75k to 267.75k.

BONUS #1:

Labor Force Participation Rate is a Non-Issue | The Big Picture

Labor Force Participation Rate is a Non-Issue

by Invictus - November 15th, 2015, 9:30am

@TBPInvictus here

In my recent piece on U-6, I mentioned that the labor force participation rate (LFPR) is a favorite target for critics of the economic recovery (and the Obama administration). I mentioned that I’d written about the LFPR quite some time ago, and that Bill McBride had done likewise at Calculated Risk:

What is probably my most comprehensive piece on the LFPR is here, published in May 2014. Bill McBride, over at Calculated Risk, has also done some work on this file (see here and here). (Bill is one of the best economic bloggers out there, and I have a ton of respect for his work and am thrilled to have gotten to know him a bit over the years.) LFPR out of the way, let’s move on.

Bill has referred to critiquing the LFPR as “the last refuge of scoundrels.” And with good reason. I had no intention of revisiting LFPR, but a recent piece of research changed my mind, as you’ll soon see.

In what I believe is her most recent piece (December 2013) on the topic, BLS economist Mitra Toossi – probably the foremost authority on the subject – projects that the LFPR will continue to decline, incorporating this chart into her work:

But enough about Bill McBride, Mitra Toossi, and me. My good pal Dave Rosenberg weighed in on the LFPR in the November 12 edition of his always fabulous Breakfast With Dave. If you subscribe to one top-notch, top-down, daily view of the world, you should make it Dave’s – it’s easily the best daily insight out there, and you can scrap five others in favor of his.

Oh, and those of us who know Rosie personally found Ritholtz’s interview with him (yesterday, here) to be both informative, with parts that are hilarious.

This is a longish, thorough, and informative read, so sit back and enjoy. And remember, no credible talking headwould cite this stat. Keep this in mind as you watch various business channels and shows. Continue on, then impress friends and family at upcoming Thanksgiving gatherings with your newfound knowledge!

(See also Bonddad Blog’s work on this topic here and here.)

Reproduced here with the author’s permission. Take it away, Rosie:

BONUS #2:

Case In Point w/ Guest Josh Brown (Video) | The Big Picture