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Thursday, May 21, 2009

Inevitable revisionism

I rather doubt this will be the last post-facto revision from the Fed:

The Fed's forecasts, released as part of the minutes from its April meeting, show that its staff now expects the unemployment rate to rise to between 9.2% and 9.6% this year. The central bank had forecast in January that the jobless rate would be in a range of 8.5% to 8.8%, but the unemployment rate topped that in April, hitting 8.9%. The Fed also now expects the gross domestic product, the broadest measure of the nation's economic activity, to post a drop of between 1.3% and 2% this year. It had previously expected only a 0.5% to 1.3% decline.

Of course, the "unemployment rate" is a complete fiction given that it doesn't count a sizeable number of people who are unemployed. According to my calculations, which is based on a more objective metric, the percentage of not-employed in the United States is 54 percent of the population, up from the all-time employment peak of 51.46 percent although much better than the economic low point of 68.74 percent in 1933.

I find the concept of the "labor force" to artificial and misleading, as well as subject to statistical shenanigans. Moreover, it inhibits meaningful analysis of the effect of an increasing young and middle-age women start working as young men and elderly men stop doing so.

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