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Thank You, Wells Fargo

10/28/2013

Each month, the Bureau of Labor Statistics publishes the “jobs report,” which the media and the markets watch closely . . . too closely.  It is a flawed measure for several reasons.  One is that people get discouraged and quit looking for jobs, which decreases the available pool of labor and therefore makes the unemployment rate rise.  This factor in the changing labor force is called the “labor force participation rate.” In other words, what percentage of “able-bodied” people are looking for work?  Of course, there is no shortage of political rhetoric around this number.

Today, Wells Fargo released a new Labor Market Index.  It includes six key labor variables and, at first blush, looks very interesting.  Next week, they will publish the statistical backup for this index, and I look forward to studying it.  Hopefully, the media and the markets can be liberated from the over-hyped “jobs report.”

In the meantime, there is one little noticed piece of jobs data that I have always found interesting, i.e., the number of unemployed for every job opening.  It has now fallen to only to 2.9, which is the lowest since 2003.  I have no doubt the job market is improving, but it is improving slower than the economy is improving.  While this is characteristic of recoveries from a financial crisis (as opposed to recoveries from ordinary recessions), this is still unacceptably slow.

I applaud Wells Fargo for this new step forward and look forward to studying it. 

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