Victory! Victory! “How the Fed Saved the Economy,” trumpeted a headline from yesterday’s Op-Ed section of The Wall Street Journal.
Affixed was the snappy subtitle, “Full Employment Without Inflation Is in Sight. The Central Bank Did Its Job. What About Everyone Else?”
This, two days after Labor Department numbers revealed that U.S. workforce participation rate has sunk to its lowest level in 38 years: 94.6 million Americans eligible for employment are watching from the sidelines.
The economy added 142,000 jobs last month. But Wall Street predicted 203,000. July and August numbers also underwhelmed. And we feel compelled to add that six of the past eight monthly job reports had to be revised downward in subsequent months.
Yet somehow -- somehow -- the official unemployment number clocks in at a hale and hearty 5.1%. Full employment, in other words.
So a curious question hangs in the air…
How can there be full employment when nearly 100 million Americans could be working… but aren’t?
Have they won the lottery? Are they simply lazy? Or could it be that they can’t find work?
How can there be full employment when nearly 100 million Americans could be working… but aren’t?
If we were of a less trusting nature, we might begin to suspect that the Labor Department was trying to pull our leg...
“When it becomes serious, you have to lie,” former president of the European Commission Jean-Claude Juncker once said. As a man in that position, we can only assume that he spoke from the invincible authority of personal experience.
So… how exactly does the government give us the official unemployment numbers without bursting into paroxysmic, sidesplitting laughter?
By sticking to Jean-Claude Juncker’s advice....
Tell the rubes that most of those 94.6 million Americans are slackers who don’t want to work. Tell them that the jobs are there, if only these layabouts would get off the couch.
And don’t include the chronically discouraged workers who stopped looking for a job because their prospects appear so bleak. The government stopped mixing these unfortunates into the official unemployment rate in 1994.
Perhaps you’re wondering what the real unemployment rate is, then?
According to John Williams of ShadowStats, if you include the long-term unemployed who’ve thrown in the towel and all the part-time workers who can’t land full-time gigs, the actual unemployment rate rises to around 23%.
Not 5%... 23%.
Conclude, dear reader, what you will…
For a visual perspective on the latest unemployment numbers and the jobs “recovery” they represent, please reference the chart below:
Chart showing that labor force participation declines, while food stamp users increase since 2008
Now, we’d be remiss if we failed to identify the author of the article on which we base today’s reckoning...
That would be no less a personage than Ben Shalom Bernanke -- former Federal Reserve chairman and proud scribbler of the autohagiography, The Courage to Act: A Memoir of a Crisis and Its Aftermath.
And what courage he acted with when the crisis struck, if you choose to measure his courage in dollar terms. The Fed’s balance sheet rocketed to about $4.5 trillion under his heroic assaults.
And so the Fed saved the economy and millions of jobs as a result. It’s true. It appears on the author’s own warrant:
“There is no doubt that the jobs situation is today far healthier than it was a few years ago. That improvement (as measured by the unemployment rate) has been quicker than expected by most economists, both inside and outside the Fed,” puffs “Helicopter” Ben in yesterday’s Op-Ed.
And with no inflation, to boot!
But he won’t accept too many plaudits. He does concede the Fed’s failure to generate healthy inflation. It just can’t hit that bewilderingly elusive 2% inflation rate we need, a dire situation “the Fed needs to remedy.”
No doubt it will, sir, no doubt it will. And you certainly did your best.
He also lobs a shell or two across the Atlantic, blasting Europe for not having the courage to act when crisis hit:
“Europe’s economic orthodoxy has until recently largely blocked the use of monetary or fiscal policy to aid recovery… Europe’s failure to employ monetary and fiscal policy aggressively after the financial crisis is a big reason that eurozone output is today about 0.8% below its pre-crisis peak.”
“Europe’s economic orthodoxy has until recently largely blocked the use of monetary or fiscal policy to aid recovery…”
A profile in lack of courage. If they only had some of Ben’s guts when the money was on the line. That must be the explanation. It can’t have anything to do with the structural weaknesses of the eurozone.
But after awarding himself the gold star for a job well done and declaring victory, he passes the baton. He’s done his part -- remember this part of his article’s subtitle: “The Central Bank Did Its Job. What About Everyone Else?”
Now, he says, the government must do its patriotic duty to spend us further into prosperity:
“Monetary policy can no longer be the only game in town. Fiscal policymakers in Congress need to step up. As a country, we need to do more to improve worker skills, foster capital investment and support research and development.”
If only Congress will get off its butt and spend…
We can only wonder whom the “everyone else” is to which he refers. Perhaps the lazy who refuse to put down the remote and go find one of those jobs he helped create.
We add one happy footnote to the latest unemployment tale, courtesy of The New York Times, and one that should add some bounce to Ben’s step:
“Public-sector jobs were one of the few bright spots, growing by 24,000 in September, thanks to hiring on the state and local level.”
More government jobs, paid for by fewer productive workers.
Congratulations, you’ve done one helluva job, Ben…
Please bear the foregoing in mind when you read the following breakdown of the latest jobs numbers, something Ben Bernanke should take a hard look at but alas, won’t...
Regards,
Brian Maher
for The Daily Reckoning