Avast ye swabs! Maybe the disconnect between improving labor markets and sluggish economic growth that has Federal Reserve policymakers scratching their heads makes sense if viewed through a pirate’s spyglass – with a lot of latitude, according to a top Fed official.
St. Louis Fed President James Bullard sees the 8.3 unemployment rate continuing to fall at a sprightly pace. That’s even though Fed Chairman Ben Bernanke has fretted the jobless rate’s precipitous tumble since August, when it was 9. 1 percent, doesn’t square with the relatively modest pace of growth.
Bernanke has explained that according to a rule of thumb that has currency among economists, Okun’s Law, the jobless rate shouldn’t fall much if growth doesn’t exceed the economy’s long-run average. So he and others at the Fed find it hard to be confident a growth rate of around 2 percent – the forecast for the first three months of the year – can do much to boost hiring.
Asked to explain his optimism regarding labor markets despite this discrepancy, Bullard offered a swashbuckling interpretation.
“Okun’s Law – it’s like Pirates of the Caribbean – it’s more of a guideline,” he told reporters after a speech, referring to the Hollywood blockbuster movie series. “I don’t think it’s that reliable of a rule of thumb.”