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

Powell Calculation

fxsoriginal

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

fxsoriginal

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.

This material is based upon information that Sitka Pacific Capital Management considers reliable and endeavors to keep current, Sitka Pacific Capital Management does not assure that this material is accurate, current or complete, and it should not be relied upon as such.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD: Complex candlesticks trouble bulls above 1.2000, ECB in focus

EUR/USD picks up bids to intraday high ahead of the week’s key event. ECB is expected to offer no fireworks but the BOC move keep momentum traders hopeful. Gravestone, followed by Dragonfly, test bulls between the key SMA, inside monthly rising channel.

EUR/USD News

GBP/USD trades above 1.39 as the dollar takes a breather

GBP/USD has bounced back above 1.39, recovering as the dollar cedes some ground. The greenback benefited from the risk-off mood, while the pound struggles after CPI missed with 0.7% and as UK PM Johnson warns of winter covid wave.

GBP/USD News

EUR/USD: Complex candlesticks trouble bulls above 1.2000, ECB in focus

EUR/USD picks up bids to intraday high ahead of the week’s key event. ECB is expected to offer no fireworks but the BOC move keep momentum traders hopeful. Gravestone, followed by Dragonfly, test bulls between the key SMA, inside monthly rising channel.

EUR/USD News

Dogecoin price disappoints on “DogeDay” but is still poised for a 50% rally

Dogecoin price fever is set to continue as the popular cryptocurrency forms a symmetrical triangle pattern on the intra-day charts. A couple more oscillations may be necessary to complete the continuation pattern, but DOGE is readying to print new highs later this week.

Read more

European Central Bank Preview: Five reasons for Lagarde to lift the euro

The German ZEW Economic Sentiment, the Sentix Investor Confidence and Markit's Purchasing Managers' Indexes have been rising and surprising to the upside in recent months. 

Read more

Majors

Cryptocurrencies

Signatures