Finally Some Good News on the Economy

Last Friday’s Employment Report showed a slight decrees in the unemployment rate. It is true that some 200,000 more persons lost there jobs then found jobs and that the unemployment dropped because 400,000 people were dropped out of the Workforce (total people working plus unemployed seeking jobs). Some think the drop in workforce was caused by the people loosing unemployment benefits during the last week of July. The employment statistics for July were based mostly on statistics taken mid month that were run through a model. Adjustments to the model could be made to the model for this drop but I think other reasons should be considered.
For over two years all of the Macro Economists have been saying that the people that were planning retirement have put it off since the worth of there investments has fallen so much. Along with the Baby boomers entering retirement age other possibilities exist. There are plenty of the baby boomers that are planning to remain in there current homes and have substantially recovered 401k accounts to at least consider retirement. Others may have been looking for other work until there unemployment insurance ran out, then decided to retire because other conditions have improved enough to retire. Retirement removes you from the workforce. Another scenario is the person becomes self employed that does not immediately show up in the employment statistics. All three of these scenarios lower the Workforce numbers without being negative for the economy. The last possibility will not be added to the workforce again until taxes are filed. Economic studies are all about allocation of resources. If the resources are now there for some to retire, some will. The August Employment Report will be interesting to see if the unemployment rate continues to fall. It will be the loss of unemployment Insurance against the need for some to increase inventories. August could be the second month of good economic news.