The U.S. Bureau of Labor Statistics (“BLS”), publishes the Labor Participation Rate each month. The Labor Participation Rate accurately reflects the state of labor in the United States. The same government agency also publishes the Unemployment Rate each month (due Friday June 4th). We view the latter as a Government marketing metric as it significantly understates unemployment. We encourage investors to focus on the former measure – Labor Participation – which we expect to improve from 61.7% in April to 61.9% in May as the U.S. Economy reopens although in somewhat of a muted fashion. A labor shortage is hampering the economic recovery. A significant number of low-wage workers have opted to receive Federal Pandemic Unemployment Compensation benefits rather than pursue employment. The misguided Federal Pandemic Unemployment Compensation program has driven up the cost of labor and reduced U.S. productivity.

• The U.S. is well below the 63.3% Labor Participation Rate of February 2020 and the 65.7% Labor Participation Rate of April 2009 (during the Financial Crisis). The U.S. is unlikely to achieve February 2020 Labor Participation levels in the near future given:
  • Expanding corporate debt levels;
  • A high probability that the cost of debt will trend higher in the coming months as interest rates inch higher. We expect the Federal Reserve to taper asset purchases late this year or in early 2022;
  • Many would-be employees are opting to stay home and collect Federal Pandemic Unemployment Compensation, a misguided Federal benefit that we believe will be extended beyond September 6th 2021;
  • A significant number of retail, food service and travel-related businesses closed permanently due to state governments shutting down state economies and limiting economic activity during 2020 and 1H 2021 – thus reducing the number of employment opportunities as compared to pre-COVID levels.

Readers may access the premium content associated with this article (below the page break) for only $9.99, or by purchasing an annual subscription for $200. The premium content associated with this article includes a PDF report and Excel file with related charts and tables. The PDF report and Excel file contain our commentary and analysis plus BLS monthly data and charts dating back 20 years to April 2001. The BLS monthly data includes the BLS Labor Participation Rate, the BLS Unemployment Rate as well as our calculated Employment Rate.

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