The Full Employment Mirage

Judging by the official 4.1% unemployment rate, US workers appear to be doing pretty well. Unlike a few years ago, almost everyone who wants a job has one. That’s an improvement.

Having “a job” isn’t the same as having a good job, of course, one that pays enough to cover your needs and lets you feel worthy and productive. Those are more elusive, although the situation is far better than it was during the recession.

But these conclusions come from data that looks at averages, and few people are average.

I thought about this because recently I’ve been helping John Mauldin write about the problems with economic data. That low unemployment rate is a key reason the Federal Reserve plans to hike interest rates three times this year (some people even think it will be four times).

That could be a serious mistake because millions of people aren’t as secure and stable as the unemployment rate implies.

The Fed should know this… because the Fed itself says so.

Photo: Getty Images

Not-So-Quality Jobs

The Federal Reserve Board has vast resources to give it every possible bit of useful data. One such resource: The Community Advisory Council (CAC). Its role is to give the Board “diverse perspectives on the economic circumstances and financial services needs of consumers and communities, with a particular focus on the concerns of low- and moderate-income populations.”

That sounds useful. If wages are the key to 2018, as I wrote recently, the Fed should hear from average wage-earners as well as bankers and politicians.

This is particularly important on job and wage issues. Like inflation, the unemployment rate doesn’t reflect everyone’s situation. If people are “employed” but still in terrible conditions, the Fed may charge ahead with the wrong policies.

The CAC’s input should reduce that risk—but apparently, it’s not.

The Fed’s Board of Governors met with the CAC on November 3, 2017. You can read the official record here. And here’s part of the council’s jobs input. (I’ve split it into bullet points for clarity, but this is a direct quote.)