{"id":109,"date":"2015-02-13T16:39:34","date_gmt":"2015-02-13T16:39:34","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=109"},"modified":"2015-02-13T16:39:34","modified_gmt":"2015-02-13T16:39:34","slug":"what-does-the-fed-do-now","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=109","title":{"rendered":"What Does the Fed Do Now?"},"content":{"rendered":"

Well, the January jobs reports are in and the economy created a reported 257 thousand jobs in January<\/a>.\u00a0 Hurray for the US economy!\u00a0 This comes hard on the heels of job growth numbers for the November and December of 423 and 329 thousand<\/a>, respectively.\u00a0 The news is certainly welcome and the trend is encouraging, but not all of the results are likely pleasing to either the current administration or the American public at large.<\/p>\n

The fly in this particular batch of ointment is that the unemployment number has ticked up one tenth of one percent.\u00a0 Of course this is to be expected.\u00a0 As I discussed in an earlier post, when consuming the job statistics, one has to make a sharp distinction between the unemployment rate and the workforce participation rate.\u00a0 Some of the folk who had dropped out of the workforce entirely are now, no doubt, coming back in as job openings become available.<\/p>\n

Indeed, Bloomberg\u2019s lead article on the January numbers, entitled Jobs Report Crushes It<\/a><\/em><\/strong>,<\/strong> agrees with this idea saying that<\/p>\n

A 257,000 January increase in employment capped the biggest three-month advance in 17 years and delivered the strongest wage gain since 2008, figures from the Labor Department showed Friday in Washington. The unemployment rate rose to 5.7 percent from 5.6 percent as the prospect of finding work lured hundreds of thousands into the labor force.<\/div>\n

 <\/p>\n

The article goes on to say that<\/p>\n

Gains in purchases can trigger a virtuous circle of hiring and spending that will probably assure Federal Reserve policy makers that the expansion can withstand an increase in interest rates later this year.<\/div>\n

 <\/p>\n

And there is the rub.\u00a0 The American people, by and large, do not understand the distinction between good and bad rises in the unemployment rate.\u00a0 The public\u2019s inability to make these distinctions is mostly due to the low economic literacy and discourse of many of the institutions that proclaim themselves as the guardians of the working man.\u00a0 Primary amongst these are the media, who gush and dance in sound bite and spin, about any \u2018favorable\u2019 movement in an indicator whether or not it is actually good.\u00a0 Also culpable are the schools, which employ teachers less economically literate than my butcher.\u00a0 After all, public school teachers don\u2019t have to worry about producing a product the public wants since the government will make sure the bills get paid and the lights stay on no matter how many students show up.\u00a0 My butcher, on the other hand, needs to show just where the beef is.<\/p>\n

So, the public is likely to get restless as the unemployment rate rises.\u00a0 As public sentiment goes, so goes the administration, which will likely leverage political pressure of the Federal Reserve to lower unemployment.<\/p>\n

For those who don\u2019t know, the Federal Reserve (or the Fed, as it is affectionately known by everyone \u2013 even themselves) is charged with control of the monetary policy of the United States.\u00a0 As the nation\u2019s central bank, it has only three arrows in its quiver:<\/p>\n