Source: Hamilton Project

 

 

Last night, I tweeted this graphic of the job creation required to get to 6.5% unemployment. (Hat tip Dylan Matthews)

At 150k new jobs per month, this implies that we have QE until 2018.

For those traders afraid of the end of QE — you have some time to  worry about it . . .

 

 

Category: Economy, Employment, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

25 Responses to “QE til 6.5% Unemployment? How’s 2018 sound?”

  1. Concerned Neighbour says:

    All too true Barry. I can’t say I’m looking forward to market shills telling me how cheap the markets are when the DOW passes through 14K, 15K, 16K, 17K, 18K and fundamentals continue to be so poor, but alas that’s probably what’s going to happen. The history books will refer to this period as the “lost decade” for savers.

  2. Frilton Miedman says:

    We’re at 7.7% now.

    Factoring participation rate, which is projected to flatten as baby boomers retire at about the same rate as population growth, a 1.2% decrease to U/I over 5 years seems like a stretch.

  3. AHodge says:

    we cant apparently have finance reform
    we did not elect a government that is even hinting at it

    but we could have another big fake asset bubble
    dow 16 17 k per above and asset backed debt securitization back in flower
    not completely fake
    you could get jobs up to 250-300k maybe

  4. Concerned Neighbour says:

    Frielton Miedman, that’s a good point about the participation rate. However, hasn’t the Fed already said that the 6.5% target isn’t firm? (i.e. a fall below 6.5% wouldn’t necessarily trigger tightening) Even should the economy go recession-free and the unemployment rate go below this level, I highly doubt a Federal Reserve under Ben Bernanke and Janet Yellen will ever tighten. Ever. They’ll keep the discount rate as low as they possibly can so that all assets, regardless of fundamentals outside of said rate, go to infinity and beyond.

  5. AHodge says:

    and folks will need to build houses and make cars eventually–like within 1-2 years failing bigtrouble

  6. Jojo says:

    Gee, if only the FED and everyone else knew that o% interest rates did not cause inflation. They could have lowered the interest rates to zero years and years ago….

  7. curbyourrisk says:

    OK….remember something.

    On December 31, there are something like 2.7 million people that will come off the employment roll as part of the fiscal cliff.

    If this happens, and those people disappear, we magically get a much lower unemployment rate. It is amazing how math works…..just what ever you do….. don’t let the American people in on that dirty little secret. Obama can;t wait to announce the HUGE drop in the unemployment rate. Imagine that…. 2.7 million people going from UNEMPLOYED to UNEMPLOYABLE…

  8. super_trooper says:

    Agree with Frilton Miedman. This calculation is unreasonable. As baby boomers retire, 150k new enployments will decrease the unemployment rate quicker expected in this graph.

  9. S Brennan says:

    If you want to cut unemployment you would LOWER not RAISE the Social Security and Medicare…and INCREASE not LOWER benefits with the stipulations that you seek no further work related compensation. Those that can/want to leave the workforce will. Lowering benefits just causes people to work longer and squirrel away funds in extremely safe instruments…or cash, instead of spending and investing in growth areas.

    Dumb

    Dumb

    DUMB

    Trust the “bipartisan” DC dummies to do the worst possible thing…at exactly the right moment.

  10. Frilton Miedman says:

    Concerned Neighbour Says:
    December 18th, 2012 at 1:03 pm
    ” Frielton Miedman, that’s a good point about the participation rate. However, hasn’t the Fed already said that the 6.5% target isn’t firm? ”

    ~~~

    I was only pointing out what seems obvious to me, we’re only 1.2% away from 6.5%, the Fed has already stated it wouldn’t be an abrupt exit (which also seems common sense to me), and, the big boys tend to move in advance of major changes

    I’m in a small short T position, have been since the 10 yr was at 1.5%, media/pundit talk of a treasury bubble has disappeared for two years….once everyone forgets, it’s usually a good time to remember.

  11. VennData says:

    Not if we gun down the unemployed. Cerberus can help with that.

    http://www.cerberuscapital.com/

    Cerberus Capital, the Westboro Baptist Church enablers. You should be proud to have your money with them. Wear it on your lapel.

  12. Greg0658 says:

    so many laws to understand the true meaning .. isn’t the UE rate going to fall – right after we fall off the fiscal cliff .. 99weeks UE insurance is OVER .. thats the rate that matters – contributing labor to capital development jobs – not all those other excess people
    wait – all those other jobs cut with the Pentagon budget loss – they go on the vacation rolls for 26 weeks – ok so June’13 – get ready to buy US Saving Bonds – don’t be late to the musical chairs party

  13. GeorgeBurnsWasRight says:

    I’d say the odds that we get at least a recession before 2018 are higher than the odds that the number of net jobs added increases to, say, 200K jobs per month. So 2018 looks optimistic.

    The only wild card is Boomer retirements affecting the number of potential workers, thus helping to decrease the unemployment rate, if not the number of people employed. This factor is the only one I can see allowing us to make the 2018 date.

  14. S Brennan says:

    Follow-up to my earlier post on what do…if you wanted to create job vacancies:

    ============================

    So while the nation had a debate on gun control, Obama went to the local dog park and collected some brun pâté to spread upon the lower 99%

    Obama agreed to a $290 billion cut for Social Security and $400 billion in unspecified Medicare cuts, and guaranteed Republicans that no more than $50 billion, in infrastructure would be spent for ten years!

    The Obama/Democratic plan would permanently extend Bush’s tax cuts on household incomes below $400,000, only the top tax bracket, 35 percent, would increase to 39.6 percent.

    If you are employed making $175,000.00+ /year do you really need a tax cut more than the guy who has been paying 3.75% extra to SSI in payroll tax for 30 years? Is your tax cut worth some kind of dignity with minimal benefits for those in the lower 85%?

    http://www.latimes.com/business/money/la-fi-mo-chain-20121217,0,761087.story

    Many Democrats are cheering Obama’s $100 billion “defense cuts”. Most of the “savings” are to achieved by “privatizing” VA services. The VA is the single most effective provider of medical care in the US, it’s reform by Clinton/Gore was without a doubt the highlight of their 8 years. Obama seeks to smash the VA just as the combat troops are fully expended from countless multiple/extended tours. Swell guy Obama, vets will remember Democrats a..long..long..long time.

  15. BennyProfane says:

    Hasn’t employment been around 4.5% in japan for some time? How’s that working out?

  16. socaljoe says:

    If we pay a few more million workers to leave the labor force, the unemployment rate could drop to 6.5% without the creation of a single new job.

  17. S Brennan says:

    Thanks right socaljoe,

    For tens of billions we could achieve what thousands of billion to finance can not.

    Cheaper still, make it either time dependent or u-6 unemployment dropping below 09.99%

  18. CSF says:

    Frilton,

    There’s another side to your point about the participation rate. Yes, the baby boomers will soon begin to retire. However, since 2008 the participation rate has declined much more for 24-54 year olds than for 55-65 year olds. This suggests much of the problem is cyclical, and as the economy improves we can expect these younger folks to re-enter the work force.

  19. S Brennan says:

    Mid/late boomers will not be retiring in anywhere the same percentile as the previous generations…they have faced a 4% higher payroll tax rate, too numerous to count, taxes disguised as fees, pension raids, almost two generations of stagnate wages, higher tuition cost for their kids and various other forms of government-financial market embezzlement.

    ….a significant portion of Mid/late boomers will die while working, retirement isn’t even on their radar. And those will be the lucky ones.

  20. rktbrkr says:

    Any ests for the size of the Fed balance sheet if we keep QEing until 2018/19? Impossibly large to exit without financial mayhem, right?

    The game plan is to 1)inflate underwater assets (largely bank owned RE) back to profitability, every home will be worth $1 million+ again
    2) continue inflating financial assets to infinity
    3) use inflation to reduce the real cost of entitlements,(Soc Sec and Medicare COLA will be farcical)
    4) force baby boomers to continue to spend their savings
    5) use inflation to push workers into progressively higher tax rates, everyone will be making $200K+ a year like retired cops

  21. Frilton Miedman says:

    s Brennan, I completely agree with your list of gripes on fair taxation and erroneous prioritization. (the demise of the Post Office – another example)

    All of it, every bit of it, is the result of bribery – elected officials acting in the interests of big campaign donors irregardless of consequence.

    Stop bribery, a “high crime” as mentioned in the Constitution, the rest falls back in place.

    ~~~~

    CSF, I hope you’re right, but don’t forget the effects of technological efficiency, as well as labor cost differentials in a globalized economy.

    An American engineer makes $4,700/month, the equivocally educated Chinese engineer lives comfortably on $250/month.

    Meanwhile, U.S. multinationals pay 2.5% to import from China to the U.S. after laying off U.S. workers and setting up shop there – while U.S. situated companies pay 25% to export to China.

    The reason?…See my above comments on bribery, U.S. multinationals have made a killing lobbying for preferential tax & regulatory treatment in trade with China at the expense of U.S. workers.

  22. My TRI model attributes much more significance to retiring boomers than most studies and calculates only 100k new jobs/month are required for status quo. Its target for 6.5% is 2015Q1.

    TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  23. catclub says:

    I figure longer. The rules the Fed has set up mean every time inflation is the least little bit above 2.5% they will
    jam on the brakes. Then, when the economy stutters, they will ease off.

    2.5% as upper bound is recipe for failure.

    Plus they are probably still not serious about caring about lowering unemployment, by comparison with
    jumping at the first hint of a scintilla of inflation.
    Dual mandate! Ha!

  24. boveri says:

    This is an incredibly important and valuable chart for any market player to have and to reference. I will print it and paste it where I can be aware of it always and particularly as we approach each monthly employment report.

    Next I need a like chart for the 2.5% inflation bogey and to place it side by side. Thank you. Thank you!

  25. socaljoe says:

    What if perpetual ZIRP and QE wakes the bond vigilantes out of hibernation and the market demands banana republic rates before 2018?

    Will the FED…

    1. Relent and end ZIRP and QE prematurely? (depression)

    or

    2. Go all in and take down 100% of new issuance? (hyperinflation)

    Will the 40 year experiment in paper money will come to and end?