What Is the `Real’ Unemployment Rate?

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Feb. 11 (Bloomberg) –- A. Gary Shilling & Co. President Gary Shilling and Bloomberg’s Josh Green discuss the unemployment rate and if the Fed should be more concerned about jobs with Bloomberg’s Mike McKee, Alix Steel and Trish Regan on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

The jobs market is improving, and we have certainly seen that in the overall numbers that seem to be getting better, but there is no inflation, what is really going on?

We are in the age of d leveraging.

The title of my most recent book.

If history is any guide, it will last about one decade.

That is a. of slow growth.

With slow growth, you get excess capacity and a lot of downward pressure on labor markets.

By the way, talk about the unemployment rate, right now if you had not have the dropping out of the labor force, the decline in the participation rate, we would be at 13%. if we had the participation rate where it was in february of 2000, at its peak?

It would be 13%. we have the real unemployment rate, we have a chart up now.

I am talking about the headline rate.

It sounds to me, gary, like you are saying that the whole unemployment rate will probably go higher before really finally settling into a lower place.

I guess one of the questions i am getting at is -- can you be in a situation where more and more people are going back to work but they just are not earning enough money?

Hence you are not seeing wage inflation, you are not seeing a lot of inflation in the economy, despite getting down to six percent unemployment?

A good point.

If you look at people in leisure and hospitality, people working as hotel desk clerks, and so on, if they increased about one million workers since they came up with their cycle, manufacturing has increased about half as much, 500,000. but on a weekly basis, manufacturers get paid almost three times as much.

That is typical throughout the spectrum.

Half the jobs that have been created are low-paying jobs.

It is not only the low-paying numbers, it is the quality of employment.

The fed is very much aware of this.

It gets at this issue that has become a very political issue.

Income inequality.

We heard janet yellen say earlier today that she actually -- he did not sound very favorable to the idea of a mandatory minimum wage.

Bill gross said that she was flat out wrong.

But it has become a bigger and bigger political issue.

The haves and have-nots.

One of the things democrats were looking for in particular, like lacy clay, saying that there was not as much income inequality, per se, a loaded political term, but jobs in the health of the labor market as it applies to minorities.

I think that democrats were looking to hear what janet yellen would say about the health of the labor market and what she planned to do about it.

Whether or not hitting the unemployment barrier would be sufficient to speed things up, or if she was going to look at other tools to determine if the fed could proceed.

I would be interested to hear what mike or gary thought about her answer.

Most democrats i spoke to afterwards were encouraged by the labor force artistic patient and job creation that came into play, but i would be interested to hear the professional opinion.

On the panel there, in new york?

There is a minimum wage, you cannot argue it out ways.

You can say that it discourages jobs or pays people more, but if you believe in markets, people get aid what the market says the market says they are worth.

Those are labor costs or any other costs.

That is part of a problem, so far.

Companies have not seen the benefit from adding the marginal worker benefit, but they do not get the of -- the additional sales.

The hope is that as the economy speeds up, that will change.

The problem so far is that we have not seen enough of that in the fed's toolkit.

They can keep interest rates low, but they cannot target it at any particular industry.

Because they do not create policy.

At the end of the day.

You are right about that.

Monetary policy is a very crude tool.

What can they do?

They could try to affect it through mortgage backed securities.

We have seen a rise in construction.

You wonder if it would be different if there was a congress that was able to actually be effective and get something done.

I will turn it over to josh green.

We started to see a little bit of a shift.

Hey, tonight we get a vote on the debt ceiling, right?

There is a bit of a change in momentum here.

If congress is able to really affect policy in a more meaningful way, will they be able to work hand-in-hand?

The first rule in congress is to do no harm and what we saw last year was actually good news . paul ryan, patty murray, putting some certainty into the economy.

The good news out of washington is that there is not going to be a debt ceiling showdown that spooks the markets and slows growth.

There will in fact be a vote tonight.

I think we have to be careful about speculating that congress might play a positive role in the recovery, but today i think we can say that there is more evidence that they will not be playing a negative role.

We will take what we can get.

Josh, gary, stay with us.

This text has been automatically generated. It may not be 100% accurate.

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