Sunday, September 23, 2007

Not in Labor Force, Part 2

This is a closeup of a previous chart. The red trend line is a 6th order polynomial. It looks just like the 5th order polynomial, and the 4th order polynomial, and yes, even the 3rd order polynomial. Four out of four higher order polynomials agree (seriously)!

Just keep in mind that trend lines can be dumb as bricks. Just ask them to find the USA on a world map and you'll see. Further, extrapolating trend lines into the future can be very dangerous for investors (dotcom bubble, housing bubble). Right?

However, this does beg the question, "Why am I sitting in this Made in China hand basket and where are we headed?"

Or perhaps it simply means we feel so much more prosperous now (with oil up at $80 a barrel) that we don't need to work any longer.

Who knows!

See Also:
Not in Labor Force (Musical Tribute)
Trend Line Disclaimer

Source Data: Current Employment Statistics (CES)


Anonymous said...

Stag Mark,

That is a cool plot - many thanks!

Hey, maybe you can come up with a new leading economic indicator - some sort of a divergence measure between the headline unemployment rate and the (1 - labor force particpation) rate?!

This would depend of course on there actually being greater divergence prior to the headline unemployment rate going up... :-)

Rob Dawg said...

The not in workforce number probably had a lot to do with the Fed running scared. In mean come on. Unanimous 50bps? Not a one objecting and prefering 25bps? That and their hedge buddies probably hinted that they didn't have near enough money to redeem requests for withdrawls without tanking the markets. Not only are inflation and the dollar thrown under the bus but there had damn well not be a thinking person that still believes the Fed is doing its job and that they don't have inside information and coordination.

Stagflationary Mark said...


The unemployment numbers are pretty much swamped by the not in labor force numbers. I suspect the latter might be telling more of the story, maybe. I tried playing around with the unemployment numbers but have yet to spot anything noteworthy (much like a mad scientist would try to make sense of a glowing green substance he just found on his shoe ;)).

Stagflationary Mark said...

Rob Dawg,

Yeah, I think there may have been good reason to panic. I also think Bernanke got a sneak peak of the CPI data that was released the next morning (if memory serves). Seeing the housing part come in flat probably added that extra little jolt.