In the wake of last Friday's miracle job performance with unemployment dropping by .2% (see Jobs Contract 23rd Straight Month; Unemployment Rate Drop to 10.0%) let's take a look at unemployment scenarios offered by the Fed to see how realistic they are.



Dave Rosenberg mentioned those scenarios in Breakfast with Dave on November 30, 2009.



Range OF Macro Outcomes is Extremely Wide



All you need to do is go to the Federal Open Market Committee (FOMC) minutes and see the wide divergence of views over the macro outlook, and this is coming from 17 of the nation’s top policymakers who also ostensibly keep in touch with each other. The range on 2010 GDP estimates is: 2.0% to 4.0%; for 2010, 2.5% to 4.6% for 2011, and 2.8% to 5.0% for 2012. These two percentage points are huge for a $14 trillion economy — we’re talking about differences that amount to $300 billion! The range on the unemployment rate forecast for 2010 is 8.6% to 10.2%; for 2011 it is 7.2% to 8.7%; and for 2012, the band is 6.1% to 7.6%. These ranges are massive. And, for the inflation rate, the range for 2010 is 1.1% to







So consider that at the Fed, there is one official that sees the potential for a return to full employment by 2012; and another that sees the prospect of deflation. These views are worlds apart and attest to our assertion that the band around any particular forecast in a post-bubble credit collapse is huge.

Fed's 2012 Forecast

2000-2009 Perspective

At the height of the internet bubble with a nonsensical Y2K scare on top of that, the economy managed to gain 264,000 jobs a month.

At the height of the housing bubble in 2005, the economy added 212,000 jobs a month.

At the height of the commercial real estate bubble with massive store expansion, the economy added somewhere between 96,000 and 178,000 jobs per month depending on where you mark the peak.



No Genuine Driver For Jobs.

The retail sector has massive overcapacity. We do not need more Home Depots, WalMarts, Lowes, Sears, Pizza Huts, Targets, Safeways, etc etc.

Commercial real estate is flooded with vacant offices and plagued by falling rents.

Housing inventory is enormous.

Boomers will be looking to downsize their lifestyles.

There is not going to be another internet boom.

My Baseline Scenario

Extremely Generous Assumptions

I am assuming there will be job gains (on average) in 2010 even though history suggests otherwise.

I have the number of jobs gained per month increasing to 170,000 jobs per month for 2013 even though I think 150,000 is a more realistic maximum target for an entire year.

I have +150,000 jobs for 4 consecutive years through 2016.

I have the Labor Pool decreasing dramatically as a result of boomer demographics starting in 2014.This acts to lower the unemployment rate.

I have the participation rate falling every year, accelerating rapidly starting in 2014 all the way through 2020.

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