Why the Fed is Flummoxed by the U.S. Labor Market
By Daniel Alpert at EconoMonitor
A New Analysis of Employment in the Era of Secular Stagnation and Global Oversupply
U.S. Jobs in 2014? A New Conundrum
Source: Bureau of Labor Statistics and author’s re-indexation.
Aggregate payroll growth in 2014 has been concentrated in low wage sectors and, for reasons discussed in this report, is not transmitting effectively to consumption growth or accelerating GDP growth.
At times I imagine Fed Chair Janet Yellen ?walking purposefully within the cloister of the Fed’s Eccles Building in Washington muttering the words of Ludwig Bemelmans’ Miss Clavel (of “Madeline” fame)….”Something is not right!”…?as she moves from meeting to meeting. A few months ago Chair Yellen revealed that she had misgivings about the jobs market?citing evidence of “labor slack.” More recently, as equity markets gyrated wildly in October, she focused on global deflationary concerns. By the end of the month, however, she crafted a post-meeting statement from the Federal Open Market Committee, taking comfort in a lower unemployment rate and a number of other data points indicating economic improvement.
Yet we are left with the feeling that Yellen is profoundly uncomfortable about declaring victory over a seven year economic slump and moving on to monetary business as usual. Our Federal Reserve Board chair is, after all, one of the best labor economists in the profession and must see that present circumstances in the jobs market just don’t feel like anything approaching normal.
Keep reading: EconoMonitor : Dan Alpert's Two Cents » Why the Fed is Flummoxed by the U.S. Labor Market.
