Hiding the Decline with Unemployment Rate Myth

December 17, 2013 05:35
Hiding the Decline with Unemployment Rate Myth

“USA is in for a prolonged period of sub par growth and very high annual deficits.” – Bruce Krasting


From Bruce Krasting

“I was blown out by the Labor Force Participation Rate (LFPR) data released Friday. Down 4 tics to 62.8%.”

“A low LFPR [ Labor Force Participation Rate ] means that there are obama-worstless workers earning taxable income. That translates into less government revenue. Payroll taxes (Social Security and Medicare) total 15% of wages. For an average worker making $40,000 a year that comes to $6,000. When the LFPR drops by 0.1% it means that there will be 180,000 less workers filling the tax bucket. The .1% drop translates into $1Bn less in tax revenue. The .4% drop in October therefore means $4Bn in lost revenue. It adds up quick.”

“The 64.4% assumption the CBO used versus the 62.8% that exists today translates into 4m less workers contributing to the system, and those 4m workers (and their employers) will not pay $25B in payroll taxes. A 1/4 trillion adjustment over ten-years just due to a revision of the LFPR. That’s real money.”

“The drop is accelerating. What are the odds that the long-term trend towards lower participation is going to turn around soon? I would say, “Not high”.”


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