Yesterday in a question and answer session Federal Reserve Chairman Ben Bernanke made it clear that the Fed’s dual mandate, one that includes maximum employment was not being met.
Bernanke said that he was not satisfied with the employment situation because of underemployment and the low labor participation rate. He also noted that the unemployment rate, currently at 7.6% is not close to the Fed’s target of 6.5% which Mr. Bernanke went out of his way to note was not an automatic cut off point.
Last week when the non-farm payroll numbers were released the bond market interpreted the top line job number as a sign that the Fed would view this as evidence of strength in the economy and the dreaded taper was on. Here at Smaulgld, we noted that the jobs report was not that good as it contained data that showed that all the jobs created were part time.
We also noted earlier this week “as investors dig behind the numbers they might come to a different conclusion that isn’t based on wishful thinking. They might come to the conclusion that the economy and employment market is not recovering even with massive doses of QE and realize the Fed has no exit strategy and no alternative but to continue to print money”
Yesterday, Ben Bernanke grasped onto the employment straw to announce that the Fed would keep monetary policy “highly accommodative for the foreseeable future”.
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