The Economy in Context: November 2018

The labor force participation rate improved in October, but by 0.2 points to 62.9%, back to where it was when the current administration took office. Labor force participation has been bouncing around between 62.7% and 63.0%, and there is little indication that trend is going to change any time soon, though the seasonal hiring taking place in November and December could push labor force participation up, as net jobs in November has been below 200,000 only once in the last six years (2016).

United States Labor Force Participation Rate

The preliminary estimate of net jobs created in October exceeded expectations, hitting 250,000 as the holiday shopping season approaches. September jobs number were revised down from 134,000 to 118,000, as making it the third worst September in six years and the second in a row below 150,000 net jobs created. August job numbers were revised upward to 286,000 jobs, representing the second strongest month since 2017.

Some of the strongest hiring occurred in the health care sector, which accounted for 36,000 additional jobs in October. This industry continues to grow, because of America’s aging population and the continuing regulation of the Patient Protection and Affordable Care Act (aka “ObamaCare) which is still mostly intact, despite Republican attempts to repeal or replace it in 2017. Only the leisure and hospitality industry saw stronger growth at 42,000 net jobs created.

United States Non Farm Payrolls

The Debt Bomb

Americans should remain skeptical of the rosy picture painted by the latest jobs report, because fundamental problems in the economy remain. Not only does the LFPR remain historically low, but due largely to the very low interest rates, long-term private sector debt has been increasing well past the point where it would break in previous cycles, and investors know that many US companies are dangerously over-leveraged.

United States Commercial and Industrial Loans

Either the Fed will raise the federal funds rate where it becomes too expensive to acquire new capital or inflation will spike and puncture the current economic bubble, but the either (or both) is inevitable. It’s simply a question of when. There is a massive correction on the horizon, and, historically speaking, the sheer amount of debt being carried on balance sheets ensures that some companies are simply not going to survive.


Liberty is For The Win!

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