The Fed, Gold & Jobs

October 07, 2013

How labor force participation tells a different story about gold than the headline data.


[This article previously appeared on and is republished here with permission.]


The most important part of an economy is simply employment. To ignore or sideline the importance of unemployment statistics is foolish—particularly when you’re considering what's happening to investments, including gold.

The unemployment statistic is one of the most important numbers being studied by the Federal Reserve Bank. Its attempt to influence growth in the economy can only be proven out by growth in employment. This is because a growing economy means the need to produce more, and consequently, increase hiring.

But all the liquidity that is being added by the Federal Reserve Bank, even though it’s plainly worked to boost the gold price over time, has had little effect on unemployment, because most of the money is not reaching the economy, or the people in the private sector.

Oftentimes, we read that the unemployment rate has dropped. But that’s unfortunately because the Labor Force Participation Rate has dropped. So the real unemployment rate is higher than what’s reported, because the participation rate is the barometer that shows how many people looking for work have lost faith that they can find full-time employment.

There also seems to be a growth of part-time workforce. This is believed to be caused by the burden that Obamacare will have on small business enterprises. So to avoid the financial burden, many smaller firms, instead of hiring full-time employees and paying benefits, prefer to hire part-time employees and avoid participating in the Obamacare scheme.

Also related to Obamacare is the increase in expenses to a family of four, which apparently will represent $766 per annum based on current studies. This will represent a loss of spendable income, which will in turn slow production and hurt the growth of the economy. In the end, less spending money means less buying, which means less employment.

But that's not all. If you take a look at our indicators, you’ll see that the trend has not reversed; in fact, it looks dismal at best. People talk about an improving U.S. economy, and I hope they’re right. Unfortunately, I believe the disparity between the haves and have-nots is growing. Even those who are able to find jobs are accepting positions beneath their education and experience.

What does all this mean to the college graduates who spend anywhere from $50,000-$150,000 for a four-year degree? It means that not only is the college expense not worth the investment, but that they are now in a hole that will be difficult to dig out of. If our young and well-educated are not able to find employment at reasonable levels, then we have again built a top-heavy pyramid much like our mortgage crisis. Plenty of spending without the future income to pay the debts will create another crisis.

I know many don't want to hear this, but a college degree should not be for everyone. The education lobby in the United States has had a hold over our government for decades. We need skilled and intelligent laborers at many levels who can earn a reasonable living. Not all people should go into debt to find employment, but sadly, this is the vision our government has accepted as a solution to our woes.

US Unemployment vs Gold Price


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