Unemployment

On Wednesday, the U.S. will publish its unemployment report. The market Consensus expects a 4.4% unemployment rate, which continues to be structurally low, despite being on the rise recently. The participation rate is expected to be around 62%, which means that the U.S. still 38% of the active population that is not looking for a job. But perhaps the most interesting factor helping the employment numbers is that the pool of people that are eligible to work is shrinking. You can see that in the chart below. Several factors are behind those numbers: (1) aging population: baby boomers are retiring, and they have been the growth engine for decades. They are now getting out of the workforce and they are not being replaced, because of (2) lower birth rates in the U.S. that have reduced dramatically the amount of US citizens eligible to enter the workforce, and (3) tougher immigration policies and deportations which are draining the pool of workers particularly in the blue collar segment. On the flip side, AI is reducing the demand for white collar jobs, and both trends are creating a very interesting dynamic, where a plumber is more demanded than a software engineer. The 4.4% unemployment number is not giving us the full picture, but rather a peephole look at reality. Finally, Tesla is announcing mass production of their Optimus robot for this year, scalding up to 1 million units by 2027. What will happen to the workforce then? Will unemployment be a relevant metric next year? Should the Fed drop it as part of its mandate?

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