Late last year I posted some questions for 2017: Ten Economic Questions for 2017. I’ll try to add some thoughts, and maybe some predictions for each question.
4) Unemployment Rate: The unemployment rate was at 4.6% in November, down 0.4 percentage points year-over-year. Currently the FOMC is forecasting the unemployment rate will be in the 4.5% to 4.6% range in Q4 2017. What will the unemployment rate be in December 2017?
Note: The unemployment rate was 4.7% in December 2016.
Forecasting the unemployment rate includes forecasts for economic and payroll growth, and also for changes in the participation rate. Note: The participation rate is the percent of the working age population (16 and over) that is in the labor force.
On participation: We can be pretty certain that the participation rate will decline over the next couple of decades based on demographic trends. However, over the last several years, the participation rate has been fairly steady as the stronger labor market offset the long term trend.
Here is a table of the participation rate and unemployment rate since 2008.
| Unemployment and Participation Rate for December each Year | |||
|---|---|---|---|
| December of | Participation Rate | Change in Participation Rate (percentage points) | Unemployment Rate |
| 2008 | 65.8% | 7.3% | |
| 2009 | 64.6% | -1.2 | 9.9% |
| 2010 | 64.3% | -0.3 | 9.3% |
| 2011 | 64.0% | -0.3 | 8.5% |
| 2012 | 63.7% | -0.3 | 7.9% |
| 2013 | 62.9% | -0.8 | 6.7% |
| 2014 | 62.7% | -0.2 | 5.6% |
| 2015 | 62.7% | 0.0 | 5.0% |
| 2016 | 62.7% | 0.0 | 4.7% |
Depending on the estimate for the participation rate and job growth (next question), it appears the unemployment rate will declining slightly by December 2017 from the current 4.7%. My guess is based on the participation rate declining slightly in 2017 – as the long term trends continue – and for decent job growth in 2017, but less than in 2016.
Here are the Ten Economic Questions for 2017 and a few predictions:
• Question #5 for 2017: Will the core inflation rate rise in 2017? Will too much inflation be a concern in 2017?
• Question #6 for 2017: Will the Fed raise rates in 2017, and if so, by how much?
• Question #7 for 2017: How much will wages increase in 2017?
• Question #8 for 2017: How much will Residential Investment increase?
• Question #9 for 2017: What will happen with house prices in 2017?
• Question #10 for 2017: Will housing inventory increase or decrease in 2017?