The official headline unemployment rate continues to fall. This month it was announced that it fell to 5.8%, the lowest since 2008. Does that mean the economy is really getting better? They say a picture is worth a thousand words. In this case, it’s worth more.
In one graph, you can see one of the fundamental transformations that has occurred in the US economy during the last ten years.
After the .com bubble and bust at the turn of the millennium, the Federal Reserve embarked on a low interest rate/easy money policy that continues to this day. During that period, the labor force participation rate for those aged 25-54 has steadily declined, while the rate for those 55 and over has risen dramatically. What does this say about Fed policy’s impact on human behavior? As it turns out, a lot.
With retirement income stagnating or falling, and the true cost of living rising, many who had left the workforce are reentering it. Those who were planning to retire are holding on to their jobs longer. This has impacted the labor force in two significant ways:
This is a fundamental shift in the psychology of the workforce that is not likely to be reversed anytime soon. Low rates and currency devaluations are entrenched in monetary policy and the world’s central banks have no practical exit strategy.
What does this mean to you?
The purpose of becoming informed is so that you can take meaningful action. Use this bit of information as another point of reference to position yourself to move through the coming years with confidence, and to be a source of stability to those around you.
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