2013-08-06barrons.com

Ever since Federal Reserve Chairman Ben Bernanke informed the world that the unemployment rate is one of his key barometers, that measure has received special scrutiny as a potential window into the Fed chairman's mind. Based on the July jobs data released Friday by the Bureau of Labor Statistics, however, another BLS measure of "labor underutilization" also bears watching.

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The bright spot was tarnished, however, by another trend in job-deprivation. Based on the BLS measure of labor underutilization that includes involuntary part-timers, the official unemployment rate "should" have read 7.9% rather than 7.4%. The math involved in generating that 7.9% is fairly straightforward.

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if you parse U-6 you find that, the reason it's unusually high is not because of the marginally attached, but because of the unusually high share of involuntary part-timers. For now, at least, we should keep our eyes on both measures.

Especially since Bernanke said that the U-3 "headline" unemployment rate might not be enough to spur the Fed to taper QE. It is shocking that this article (and so few others) have picked up on this. To us, it shows that Bernanke is clearly looking for an "out" to continue with QE, even if the headline U-3 unemployment rate falls to the Fed's soft "target."


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