MacroScope

“This was really eye-opening for me”: Fed’s Raskin shocked at low quality of work at local job fair

The first portion of Federal Reserve Governor Sarah Bloom Raskin’s remarks to the Roosevelt Institute earlier this month were pretty standard central bank fodder. Raskin, on the dovish side of Fed monetary leanings, said U.S. unemployment was still too high, and far more progress was needed in bringing a somnolent job market back to life.

But the second half of her comments offered an unusually personal look at one Fed official’s dismay with the country’s economic situation. Stumbling into a job fair near her house, Raskin was stunned by the generally low quality of positions available. In her own words:

I became interested in this question of quality somewhat by accident. I did something atypical one day. I decided on my way into work I would stop at a jobs fair. There was a jobs fair at a local community college close to my home and I thought, I’m going to, you know, instead of pounding through all this heavy data that we typically look at at the board of governors, let me just go into this job fair. It turned out to be a really interesting morning, I have to say.

I should preface this by saying – purely anecdotal here, this is not something that is going to count as hard science or pass much muster in terms of statistical significant. But it was really interesting to me.

I went in and I have to say the kinds of jobs that were being offered surprised me. There were a number of restaurant jobs, some jobs from the military. There was one job from a community bank. Then there were a slew of jobs from, of all places, swimming pool companies. I thought that was kind of interesting. When I inquired about what these jobs were, they were lifeguard jobs, which I thought also was quite telling because back in the day to be a lifeguard I didn’t think quite required an advanced degree. These were the kinds of jobs we got in high school summers, I thought.

What’s in a (trend payrolls) number? The Chicago Fed paper that shook the markets, ever so slightly

      

Ann Saphir contributed to this post

The apparent conclusion from one of the most dovish regional Federal Reserve banks was rather surprising: The economy may actually need much smaller monthly job growth, of around 80,000 or less, in coming years in order for the jobless rate to keep moving lower. The immediate policy implication, it might seem, is that the U.S. central bank may have to tighten monetary policy much sooner than previously thought.

Andrew Brenner of National Alliance remarked that, while the report should be taken with a grain of salt, “this translates to lowering the bar to QE tapering.”

Right? Not necessarily, writes Goldman Sachs economist Jan Hatzius. Here’s why:

To ‘taper’ or not to ‘taper’? Fading the Fed semantics debate

Is Federal Reserve Chairman Ben Bernanke avoiding the word “taper” in order to temper expectations that the U.S. central bank will ratchet down its massive bond buying program? This is one view that’s been widely bandied about in recent days.

But then why is it that the Fed officials who are most eager to “taper” have pretty much stopped using the word, too?

The last time Dallas Fed President Richard Fisher used the “T” word in a public speech was in February. But there’s no evidence at all that he’s backing off from his support of the idea. He’s been adamant the Fed should not yank the punch bowl away (or, in his words, go from Wild Turkey to cold turkey) but should gradually reduce stimulus.

No relief in sight for millions of unemployed Americans: Cleveland Fed report

The new normal is getting old. And when it comes to America’s stuttering employment market, it’s not going to get much better any time soon, according to a new report from the Cleveland Fed.

The U.S. economy created 175,000 new jobs in May, while the jobless rate rose slightly. It was a neither-here-nor-there sort of report. In the Labor Department’s own words: Both “the number of unemployed persons, at 11.8 million, and the unemployment rate, at 7.6 percent, were essentially unchanged in May.” 

Unfortunately, this anemic pattern is likely to be long-lasting, write Cleveland Fed economists Mark Schweitzer and Murat Tasci.

Mystery of the missing Fed regulator

It’s one of those touchy subjects that Federal Reserve officials don’t really want to talk about, thank you very much.

For nearly three years now, no one has been tapped to serve as the U.S. central bank’s Vice Chairman for Supervision. According to the landmark 2010 Dodd-Frank bill, which created the position to show that the Fed means business as it cracks down on Wall Street, President Obama was to appoint a Vice Chair to spearhead bank oversight and to regularly answer to Congress as Chairman Ben Bernanke’s right hand man.

For all intents and purposes, Fed Governor Daniel Tarullo does that job and has done it for quite some time. He’s the central bank’s regulation czar, articulating new proposals such as the recent clampdown on foreign bank operations, and he keeps banks on edge every time he takes to the podium. But he has not been named Vice Chair, leaving us to simply assume he won’t be.

Is Congress the ‘enabler’ of a loose Fed?

We heard it more than once at today’s hearing of the Joint Economic Committee featuring Fed Chairman Ben Bernanke: the central bank’s low interest rate policies are allowing Congress to delay tough decisions on long-term spending.

As U.S. senator Dan Coats asked pointedly: “Is the Fed being an enabler for an addiction Congress can’t overcome?”

Yet, if you read the subtext of Bernanke’s testimony closely, it may actually be Congress that is enabling a loose Federal Reserve.

What to expect from Bernanke testimony and Fed minutes this week

Financial markets this will be keenly focused on congressional testimony from Fed Chairman Ben Bernanke and minutes from the central bank’s April 30-May 1 meeting, particularly given a thin data calendar. The latter may be the more interesting one, since it will offer hints into how far Fed officials are leaning in a direction of curbing the pace of its bond-buying stimulus, potentially late this summer.

The economic backdrop has been just mixed enough to leave policymakers cautious about taking their foot off the gas. Still, if we get a few more months of strength in the labor market, Fed officials may just be able to say “substantial progress” has been made in the outlook for the labor market – their stated precondition for an end to asset buys.

Still, Harm Bandholz at Unicredit says markets should not confuse a debate about tapering bond buys with some immediate reversal of the Fed’s policy of ultra low rates.

Kocherlakota on Fed stimulus: Don’t stop ‘til you get enough

Ann Saphir contributed to this post

Minneapolis Federal Reserve President Narayana Kocherlakota has gone from being one of the U.S. central bank’s more hawkish characters to arguably its most dovish. In line with this transformation, Kocherlakota told a conference sponsored by the University of Chicago’s Booth School of Business that the Fed, despite its extensive bond-buying over the last few years, has not done enough to spur growth.

The FOMC has responded to this challenge by providing a historically unprecedented amount of monetary accommodation. But the outlook for prices and employment is that they will remain too low over the next two to three years relative to the FOMC’s objectives. Despite its actions, the FOMC has still not lowered the real interest rate sufficiently in light of the changes in asset demand and asset supply that I’ve described.

To get a sense of what he means, see the graphs below: U.S. inflation continues to undershoot the Fed’s 2 percent target, and is actually drifting lower, while unemployment, though down from crisis peaks, remains stubbornly high.

Letter of the Lew: Treasury comments on change of guard at troubled IRS

Here are comments from a U.S. Treasury official on Secretary Jack Lew’s meeting with incoming Acting IRS Commissioner Daniel Werfel this morning, following a scandal of political targeting that cost the previous acting commissioner his job. Treasury officials knew about the problem as early as last June, according to this report in the Wall Street Journal:

Secretary Lew met with incoming Acting IRS Commissioner Werfel this morning and directed him to conduct a thorough review of the organization in an effort to restore public confidence in the IRS and ensure the organization is providing excellent and unbiased service to the taxpayer. Secretary Lew also requested that he take actions immediately as appropriate, and that within the next 30 days, Werfel report back to the President and him about progress made in three areas: 1) ensuring staff that acted inappropriately are held accountable 2) examine and correct any failures in the system that allowed this behavior to happen and 3) take a forward-looking systemic view at the agency’s organization.

What’s it all about?

G7 finance ministers meet London on Friday and Saturday. Since they and many more met in Washington only three weeks ago and not much has changed since, it’s tempting to ask what is the point of this British gathering. There have been mutterings from some of the travelling delegations to that effect.

If there is an angle, it is the unusual focus on financial regulation (usually not part of the Group of Seven’s remit) with some feeling that more than four years after the collapse of Lehman Brothers, efforts to put in place structures to prevent similar events spinning out of control in future are flagging. That puts the euro zone’s fluctuating plans for a banking union firmly in focus, which in turn puts German Finance Minister Wolfgang Schaeuble right in the spotlight.

On Tuesday, he said elements of a banking union would have to be pursued without lengthy and arduous treaty change, something he’d previously said would be necessary. Was that a softening of his position? Er, probably not. More likely, the subtext is that because treaty change takes too long, Berlin will pursue only those elements of banking union that don’t require it – i.e. bloc-wide regulation yes, but forget about a bank resolution mechanism let alone a joint deposit guarantee.