Unemployment Goes Down to 5.9%…Defies “The New Normal”


The economy is chugging along. This drop in the unemployment rate is getting us back to a normalized economy. It was just a matter of time. I’ve been predicting this rate since 2010. In general, recovering from a harsh economy, the rate drops about 1% a year. So, not much of a prediction. More like a rule of thumb that most people didn’t believe any more.

Bill Gross, known as “The Bond King”, just left the company he co-founded, PIMCO. He and his company started this hogwash of a “new normal” economy. Basically, what they meant was the U.S. will be like Europe: regular high unemployment (e.g. 6-9% range) and slow GDP growth of, say, 1 percent annually. Before his departure, he and the company changed this idea to “new neutral”, a more optimistic view. I guess it was just a way of saying the economy is actually quite good and they may have been wrong.

So, yes, the labor participation rate hasn’t really moved. This rate could be considered a more accurate measure of unemployment. But there’s no denying we’ve catapulted out of the economic shed into our typical dynamic growth. When you look at GDP estimates and corporate profits estimates, we’ll hit new record highs for both as far into the future as there are estimates.

Bye bye New Normal.


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