Analysis of Bernanke’s “Labor Weakness” Statements
Unfortunately, Bernanke’s statements offer surprisingly little economic insight.
For example, please consider the Fed’s estimate that the “unemployment rate will average 8.2 percent to 8.5 percent in the fourth quarter”.
Perfectly Useless Projection
Let’s assume Bernanke is correct. Is that a meaningful projection?
The short answer is the projection, even if totally accurate, is perfectly useless. Let’s analyze “why? in light of Bernanke’s estimate that it takes 125,000 jobs a month to keep up with demographics (birthrate plus immigration).
Three Cases In Which Unemployment Rate Stays Flat
- Is the Fed projecting 125,000 per month in line with expected demographics?
- Is the Fed expecting 200,000 jobs a month with a rising participation rate that holds the unemployment rate steady?
- Is the Fed expecting 50,000 jobs a month with a falling participation rate that holds the unemployment rate steady?
It would be more useful (assuming there is any use to Bernanke’s statements which is certainly debatable) to know just what he is thinking because those three scenarios are vastly different in terms of economic significance, even though they all project the same 8.2 percent to 8.5 percent unemployment rate prediction.
In other words, the Fed’s projection, even if accurate, is totally useless, not that anyone should be paying any attention to what he says in the first place.
via Mish’s Global Economic Trend Analysis: Bernanke Finally Says Something That Seems to Make Sense “8.3% Unemployment Understates Labor Weakness”; Critique of Bernanke’s 2014 Pledge; Perfectly Useless Projections.