Monday, March 26, 2012

Bernanke wrings his hands on jobs. Market reacts favorably.

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So. Federal Reserve chairman Ben Bernanke gave a speech this morning.:

My remarks today will focus on recent and prospective developments in the labor market. We have seen some positive signs on the jobs front recently, including a pickup in monthly payroll gains and a notable decline in the unemployment rate. That is good news. At the same time, some key questions are unresolved. For example, the better jobs numbers seem somewhat out of sync with the overall pace of economic expansion. What explains this apparent discrepancy and what implications does it have for the future course of the labor market and the economy?

Importantly, despite the recent improvement, the job market remains far from normal; for example, the number of people working and total hours worked are still significantly below pre-crisis peaks, while the unemployment rate remains well above what most economists judge to be its long-run sustainable level. Of particular concern is the large number of people who have been unemployed for more than six months. Long-term unemployment is particularly costly to those directly affected, of course. But in addition, because of its negative effects on workers' skills and attachment to the labor force, long-term unemployment may ultimately reduce the productive capacity of our economy.

Once again, it seems to be a speech that depends on the individual perspective as to the take-away. David Dayen at FDL News titled it "The “Better But Not Good Enough” Economy Conundrum" and it follows a pattern from earlier speeches. Last June, I wrote a post after a Benbernank speech that appeared to be at least four different speeches, depending on the spin. Getting it down to only two spins is a bit better. The problem I have with Bernanke and his speeches is that while he talks about the problems of the long term un and underemployed, he never really seems to get around to doing anything about it, even while "pursuit of maximum employment" is part of the stated Federal Reserve mission.

While it appears that the folks on Wall Street and the various stock exchanges loved Bernanke's speech, it has been obvious to anyone paying attention that Wall Street and the various stock exchanges don't really have much of a connection to the real world economies. As Dayen notes in his post:
The problem is that many believe that the Fed’s monetary policies have not been accommodative enough to match the deep hole in economic performance. The other reason some became alarmed by Bernanke’s speech is that he accurately but incompletely touted the labor market recovery, with its 250,000 increase in private market jobs on average over the past three months. Bernanke goes through all the positive indicators and only at the end gets to the negatives, like the 5 million payroll jobs below peak, the still-elevated unemployment rate, and most importantly the shrinkage of the employment-population ratio and the labor force participation rate. Brad DeLong thinks that Bernanke is “preparing to declare victory,” and that “To transform cyclical into structural unemployment is not a victory for policy.”
Amazingly enough, just last month, The Benbernank testified before both the House and the Senate where the Republicans in both chambers took him to task for (from the NY Times House article):
WASHINGTON — Congressional Republicans criticized the Federal Reserve on Thursday for working to reduce unemployment and revive the housing market rather than maintaining a single-minded focus on inflation.
And from the Senate article, also via the NY Times:
Senate Republicans on Tuesday, like their colleagues in the House last week, expressed concern that the Fed effectively was declaring that it would prioritize job growth over inflation.
I guess the folks in the House and Senate would just as soon not deal with the problems of 25M to 30M un and underemployed. They must not think we vote. Or matter.

In the immortal words of Mr. Pierce
Fck the deficit! People got no jobs. People got no money!

And because I can:

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