Bernanke Walks It Back
Posted by Larry Doyle on July 18, 2013 8:53 AM |
It took a few weeks, but the relatively recent smokescreen of a strengthening economy put forth by Ben Bernanke began to lift yesterday.
I find it especially interesting that it was not some new string of weak economic data that prompted the Fed chair to express increased caution about what is truly going on in the real world economy.
In fact, for what I believe might be the first time, Bernanke cautiously addressed the fact that the structural changes in our economy reflected in a significant decline in the labor force participation rate might be more indicative of our economic health than the actual unemployment rate.
A whiff of the truth amidst the daily diet of verbal diarrhea emanating from D.C? What a novel concept.
I think I felt a minor shift in the earth’s core when I read this piece of Bernanke’s statement:
. . . if a substantial part of the reductions in measured unemployment were judged to reflect cyclical declines in labor force participation rather than gains in employment, the Committee would be unlikely to view a decline in unemployment to 6-1/2 percent as a sufficient reason to raise its target for the federal funds rate.
Hey now, but Ben, there is no need for the qualifier “if” in your statement.
Those within the blogosphere and elsewhere have been hammering this nail for only the last few years. In fact, this very point was highlighted by the founder of Boston Properties, Mort Zuckerman, in a recent WSJ editorial, A Jobless Recovery Is a Phoney Recovery:
That brings us to a stunning fact about the jobless recovery: The measure of those adults who can work and have jobs, known as the civilian workforce-participation rate, is currently 63.5%—a drop of 2.2% since the recession ended. Such a decline amid a supposedly expanding economy has never happened after previous recessions.
Adding fuel to this fire, Zuckerman provides it:
Another statistic that underscores why this is such a dysfunctional labor market is that the number of people leaving the workforce during this economic recovery has actually outpaced the number of people finding a new job by a factor of nearly three.
Statistics and data such as these do not turn around in a month or three and Ben knows it which is why he also interjected in his comments that,
. . . a highly accommodative monetary policy will remain appropriate for the foreseeable future.
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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.