The U.S. workforce has been shrinking rapidly in recent years, but a new report from UniCredit highlights just how massive the effect of this trend really is. Economist Harm Bandholz says it amounts to a gaping 3.6 percentage points of U.S. unemployment.
Gabriel Debenedetti contributed to this post
Federal Reserve officials appear to be getting cold feet. Having just announced an open-ended bond buying program in September and then broadening it in December, minutes from last month’s policy meeting suggested an increasing caution about additional monetary stimulus among the Federal Open Market Committee’s core of voting members.
Are the world’s top central bankers too paranoid about inflation? As the United States struggles to sustain a weak recovery while the euro zone and Japan face outright contractions in output, a number of economists have called for the monetary authorities to be less dogmatic about adhering tightly to low inflation targets.
After a “significantly better than expected” ADP employment report, Goldman Sachs has raised its estimate to 200,000 for the U.S. Labor Department’s December nonfarm payroll report due Friday, the firm’s team of economists said. Separately, initial jobless claims were higher than expected for the most recent week, but the Labor Department reported some holiday distortions, the economists noted. “Overall, the data since our preliminary estimate last Friday have been strong enough to prompt us to revise up our forecast for nonfarm payrolls to 200,000,” the economists concluded.
Who hasn’t heard of Paul Krugman these days? The Nobel-winning Princeton economist and New York Times columnist has emerged as a key voice in American liberalism, and is berated by the right for his support of heavy fiscal stimulus, higher inflation and a strong social safety net.
For the first time, Federal Reserve Chairman Ben Bernanke has given credence to the idea that America’s long-term economic potential may have been permanently scarred by the turmoil of recent years. In a speech to the Economic Club of New York, Bernanke said:
The Federal Reserve’s open-ended bond-buying stimulus announced last month was coupled with a promise to continue purchasing assets “if the outlook for the labor market does not improve substantially.” Central bank officials are expected to continue discussing what parameters they will take into account to define such progress, but are not expected to come to any hard and fast decisions just yet.
The September unemployment rate was the lowest since December 2008 after surprisingly large back-to-back declines, sending economists back to the drawing board after big forecast misses. Some pointed to the large increase in involuntary part-time employment – erroneously so, according to an analysis from Ray Stone, economist and managing director at Stone & McCarthy.
As traders and economists hash over the sharp and unexpected drop in the U.S.jobless rate to 7.8 percent, they might do well to review some key data points that offered early hints that at least some households were seeing improvement in the labor market. Wall Street analysts in a Reuters poll had forecast a rise in the unemployment rate to 8.2 percent.