Courtesy of Lee Adler of the Wall Street Examiner
The clueless, delusional Fed still thinks that the 10 million jobs that disappeared when the credit bubble popped were real jobs. The bubble spawned about 10 million fake jobs from 2004 to 2007, including real estate and mortgage order takers, processing clerks, document signers, and Wall Street criminal scheme functionaries, not to mention, carpenters, plumbers, electricians, and laborers, who were needed to build all the worthless housing units to meet fake demand. Even now, 5 years later, many of those units stand vacant, never to be occupied.
Having reached the conclusion that these phony bubble jobs were real and can be brought back, the Fed has created a rationale for itself to do more money printing toward the goal of starting another bubble to bring back those jobs. Meanwhile some private economists have figured out that the fake jobs are never coming back, and any additional Fed easing will only contribute to a massive, but till now camouflaged, inflation problem.
Most of the damage inflicted on the U.S. labor market by the recession is reversible, according to Federal Reserve research, leaving open the possibility that additional stimulus will be effective in reducing joblessness.
About one-third, or 1.5 percentage points, of the jump in unemployment from 5 percent as the economic slump began to its 10 percent peak in October 2009 can be traced to a mismatch between the supply of labor and job openings, according to a study released this month by the Federal Reserve Bank of New York. That leaves the remainder due mainly to a lack of demand.
“There is still considerable weakness in the labor market,” Aysegul Sahin, one of the authors and a New York Fed economist, said in an interview. “We see that the weakness in the labor market is not specific to certain groups, such as certain occupations or certain locations. This points to a case where labor market weakness can be attributable to the overall weakness in the economy.”
That conclusion goes to the heart of a debate pitting economists at banks like UBS Securities LLC and Barclays Plc who say the economy has fundamentally changed against central bankers, including Chairman Ben S. Bernanke, who say the distortions are transitory. A permanent shift would mean policy makers applying additional stimulus risk spurring inflation by driving unemployment down too far too quickly, while a temporary dislocation would indicate more can be done.
“There is a structural unemployment problem in the U.S.,” said UBS economist Drew Matus. “The best the economy can do, even if it is performing well, is an unemployment rate that is probably significantly higher than it was pre-crisis.”
UBS’s Matus puts the new equilibrium level of U.S. joblessness in the range of 7 percent to 8 percent.
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