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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsUnemployment Falling for Wrong Reason Creates Fed Predicament
By Rich Miller - Sep 9, 2013
The good news may be bad news for the Federal Reserve as it considers when to begin scaling back its stimulus.
While unemployment dropped last month to 7.3 percent, the lowest level since December 2008, the decline occurred because of contraction in the workforce, not because more people got jobs. Labor-force participation -- the share of working-age people either holding a job or looking for one -- stands at a 35-year low.
The reduced workforce poses a problem for the Fed, said Roberto Perli, a former central bank official who is now a partner at Cornerstone Macro LP in Washington. The unemployment rate is coming down faster than the Fed thought, but its not declining for the right reason.
The jobless rate is important because Chairman Ben S. Bernanke and his colleagues have established it as the lodestar for policy. Bernanke has said he expects the Fed to complete its asset-purchase program in the middle of next year when unemployment is around 7 percent.
So long as inflation remains contained, the central bank has said it wont even consider raising its benchmark interest rate until unemployment falls to 6.5 percent. The Fed cut its target for the overnight interbank rate effectively to zero in December 2008 and has held it at that record low.
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http://www.bloomberg.com/news/2013-09-09/unemployment-falling-for-wrong-reason-creates-fed-predicament.html
LiberalEsto
(22,845 posts)Just another bit of fancy linguistic skating around the plain fact that there are not enough jobs for all the people who are out of work, and that nobody is doing anything to create those jobs.
Jackpine Radical
(45,274 posts)is just another measure of hopelessness and helplessness. Unless, of course, we've been visited by some population-shrinking epidemic that they haven't bothered telling us about.