Employment versus unemployment

US Participation Rate
Source: Bureau of Labor and Statistics
The rate was at 63.2% in August – meaning that 63.2% of Americans who were capable of working, actually wanted work.
As of October, this rate has dropped to 62.8% – the lowest since 1978.
That doesn’t seem like much, but put a head count to that figure and it shows an astonishing 932,000 Americans left the workforce. This marks the third highest monthly increase in people dropping out of the labor force in US history.
So America created 204,000 jobs, but nearly a million people left the workforce.
If people stopped leaving the workforce, unemployment would actually rise substantially.
The Fed’s Glorified Measures 
The declining labour participation rate actually bodes well for the Fed because as more people leave the workforce, unemployment numbers drop, which creates the illusion that the Fed is doing its job.
The Fed gets exactly what it wants: the illusion that their role is great for the world, while the world continues to engulf itself in its monetary system.
With all this talk of tapering, let’s not forget that this current round of QE is pegged at quantitative thresholds; removal of stimulus measures (low rates and asset purchases) will only be considered once unemployment reaches 6.5% or less.
Back in September, I did a little experiment that calculated how many jobs would need to be created for the Fed to reach its 6.5% unemployment target rate.
My findings showed that America would need to create at least 200,000 jobs every month for the next 12 months to reach an unemployment rate of 6.5% (see my PAST LETTER for exact numbers).
But as I mentioned, if the labour force continues to drop, the Fed could achieve their target much faster.
Using the same formula but changing the labour force participation rate to the current rate of 62.8%, America would now need to create 191,645 jobs per month – as opposed to September’s 197,222 – for the next 12 months to reach the Fed’s rate of 6.5% (based on payroll employment); based on the change in household employment, 203,229 jobs are now needed, as opposed to September’s 209,588.
That’s a drop of around 6000 jobs per month.
Simply put, the more people who leave the workforce, the faster America will get to achieving a lower unemployment rate.
So let’s forget unemployment and look at employment.