Labor Force Keeps Falling

CNBC, in their summary of the employment numbers, finally noticed it (emphasis added).

On that labor force theme, the participation rate edged down to 61.4%, now off 0.7 percentage point this year alone due to the exodus of nearly 1.4 million people. There’s a strong degree of immigration noise in that number, but it still changes the dynamics by which policymakers will evaluate the labor market. A 4.1% unemployment rate suddenly doesn’t seem as impressive with participation at its lowest in 50 years outside of the Covid era.

"Immigration noise” is ther fancy way of saying, “we have a lot fewer people working because of the deportations.” The household data (from BLS) reveal the result: 1 million fewer people on the job, and 1.3 million fewer in the workforce in general.

Back when I projected what this labor shortage would mean, I figured a loss this heavy would increase inflation by roughly 1.2%. That means roughly a third of the inflation showing up in the CPI is due to this.

This is no longer hypothetical. The Great Patriotic Labor Shortage has arrived.