Another Indication Full Employment Only Applies To Limited Circumstances If At All

When the unemployment rate tumbled toward 5% and now below it, economists thought that was overheating. For monetary policy, that was much of the basis for adjusting Fed communication (not rate hikes, as credit and funding markets are doing the opposite). Despite the “best jobs market in decades”, however, confirmation of that robust labor agenda is scarce at best and really non-existent.

For instance, the last time the unemployment rate was at or near “full employment” below 5% was 2007 just prior to the Great Recession. That year there were an average of 26.3 million Americans receiving Supplemental Nutrition benefits, or SNAP. As of the latest estimates from the USDA for November 2015, there were 45.5 million under SNAP assistance even though again a 5% unemployment rate and orthodox suggestions of “full employment”. The difference of 19 million matches the general outline of the “missing” 15 million from the employment statistics, and thus the overall economy.

As you can see in the first chart above, the discrepancy did not start with this “cycle” but actually the one before it – the “recovery” after the dot-com recession featured the same seeming permanence. The level of apparent subsistence has only grown despite the assurances of the unemployment rate in each cycle, exploding especially in the aftermath of the Great Recession. It suggests, as the participation rate, that the labor statistics are only detecting an increasingly withered corner of the overall economy. In other words, the whole economy shrinks but the mainstream statistics only detect pieces that suggest it didn’t. Further, the whole economy has been under this shroud since the turn of the century – just as the serial asset bubbles got fully underway.

That SNAP levels and the participation rate would so closely align and therefore conspire directly against the mainstream version of the economy is highly compelling; especially since both the unemployment rate and Establishment Survey are so highly managed and adjusted. They are, in general, intentionally narrowed views that by 2016 are dedicated to far too small an economic proportion to be useful. The SNAP/participation rate picture of the economy matches increasingly the dearth of spending and income/wages. It never made sense that a “manufacturing recession” would develop during the “best jobs market in decades”; those are not just different economic suggestions, they are so different as to be mutually exclusive.