The Great Recession set the U.S. labor market so far back that there is still a long way to go before policymakers can claim victory and point to a true return to healthy conditions, a top former Fed economist said. The U.S. economy remains around 3 million jobs short of its pre-recession levels, and that’s without accounting for population growth.
Ask top Federal Reserve officials about adopting a target for non-inflation adjusted growth, or nominal GDP, and they will generally wince. Proponents of the awkwardly-named NGDP-targeting approach say it would be a more powerful weapon than the central bank’s current approach in getting the U.S.economy out of a prolonged rut.
I asked Fed Chairman Ben Bernanke during his quarterly press conference this week if the central bank had its own estimate for the implicit subsidy that banks considered too big to fail receive in the form of cheaper borrowing. Senator Elizabeth Warren had confronted him at a recent hearing with a Bloomberg estimate of $83 billion which itself was derived from an IMF study. At the time, he dismissed her concern: “That’s one study Senator, you don’t know if that’s an accurate number.”
It’s had a good run, and will remain in use for the purposes of alerting reporters that “Treasury is in the (press) room.” But when it comes to the Federal Reserve’s monetary policy decisions, which are also released out of Treasury, the central bank is ditching the old ringer.
It’s not difficult to see why quantitative easing was not high on the Federal Reserve’s list of priorities in 1982. The term was nowhere to be found in the handy booklet pictured above, which I found while perusing the shelves of Reuters’ two-desk bureau inside the U.S. Treasury. Paul Volcker’s Fed was still battling runaway inflation, so policy options designed for a zero interest rate environment were nowhere near the horizon.
Is the pickup in U.S. jobs growth over before it even started? That’s the conclusion you might reach if you checked out the latest Texas employment update from the Dallas Fed , which shows the Lone Star state added only 4,000 jobs in January.Texas, as boosters like Dallas Fed President Richard Fisher never tire of pointing out, has been an enormous engine of job growth for the United States since the end of the Great Recession.
Watching Ben Bernanke testify before Congress in recent years, it’s hard to shake the feeling that this is a Fed Chairman who has been largely abandoned by his own party. Hearing after hearing, Bernanke receives steady support and praise Democrats for his efforts to stimulate a fragile economic recovery – and takes constant heat from Republicans for what they perceive as the possible dangers of low interest rates.
That’s not a typo in the headline. In a recent speech that took some mental gymnastics to absorb, Federal Reserve Chairman Bernanke countered critics of his low rates policy by arguing that a loose monetary policy is the best way to ensure rates can rise to more normal levels.
Remember those green shoots? Ever since Fed Chairman Ben Bernanke uttered those words in response to the first signs of recovery from the Great Recession in 2009, many forecasters – including Fed officials – have consistently overestimated the economy’s strength.
Federal Reserve Chairman Ben Bernanke may be keeping quiet about his future plans, but he sure doesn’t sound like someone planning to seek Senate support for a third term at the helm of the U.S. central bank.