Is the Real Unemployment Rate 2.3%?

by | Oct 21, 2021 | Wealth Management

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Source: Michael Liebowitz, Realinvestmentadvice.com

By:  Thomas Steffanci, PhD, Senior Portfolio Manager

Is the real unemployment rate 2.3%? If you back out people who quit voluntarily to look for better paying jobs, the answer is yes. Quitters are still “employed”. They are in transition to other employment opportunities and should be considered as part of the labor force. If you adjust the current unemployment rate of 4.8% for the 2.5% “quit rate” (highest in 20 years) the “real” unemployment rate is 2.3%. This belies the Federal Reserve’s continuing easy monetary policy because of a weak labor market.  If it is actually “tight” it adds to the case that inflation is likely to be more persistent and higher, prompting earlier increases in the Federal funds rate than the market now expects.

*Note – blog post corrected corrected 10/22/2021.

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