There is something wrong looking at unemployment rate only

For some reason or another, we are focused on unemployment rate whereas not enough attention is given to labour participation. Is this because the moment a light is shone on labour participation for economies like Japan and US, the healthy economy narrative starts to fall apart? That the all-powerful stimulations given by their policy makers to these economies actually look rather flaccid?

 

‘Healthy’ unemployment rate

From BBC.com last week,

Japanese unemployment rate hits two-decade low

Somehow I have the feeling that we are supposed to believe that low unemployment rate is a very good thing, that signals economies are moving in the right direction, that stock markets should be booming. That policy makers are doing their job, everyone has an income, things are great. And that is why every month we wait excitedly for unemployment statistics like the NFP to be updated like it is a sacred holy indicator.

Yet somehow, no one wants to explain why the Japanese has not been growing much since the late 80s, that Japanese labour participation is at 2-decade low. Is this some kind of oversight or something ingenious like maybe putting on blinkers on every market watcher.
 

source: tradingeconomics.com
 

 
This is in my opinion such an important question that deserves a clear straight forward answer.
 

source: tradingeconomics.com
 

 

Really healthy labour participation economy

You see – I think I know what an economy that has really meaningful employment looks like and it should look like this.
 

And really here in the example of Singapore the data makes sense because the two measures – labour participation and unemployment –  agree with each other. In the examples of Japan and USA where the two measures totally diverge, they don’t make sense at all.


source: tradingeconomics.com

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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