In response to an FT Blog by Gavyn Davies on 5th June 2016, entitled 'Global activity steady, but the US slows again'.
Leaving aside the claimed desirability of a 2% inflation target...and leaving aside that this would need to be nearer 4% in order to outgrow the debt...the US U3 unemployment figures are 'goal-seeked' nonsense. They do not remotely represent the amount of 'slack' in the labour market, which is what policy makers need to affect if they are targeting inflation.
The 4.7% unemployment figure released on Friday does NOT mean that 19 out of 20 people who want a job actually have one. One 55 year old doing two part time jobs is NOT equal to two jobs except in the fantasy land U3 spreadsheet of a central banker.
To understand and affect 'slack', then a better measure is U6, which includes so-called 'discouraged workers'. From the Bureau of Labour Statistics:
"Discouraged workers are a subset of persons marginally attached to the labor force. The marginally attached are those persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, discouraged workers were not currently looking for work specifically because they believed no jobs were available for them or there were none for which they would qualify".
U6 is currently just under 10%. Even this figure does not take into account the number of people who have given up looking for work entirely or students who are at college because getting a loan they'll never repay is easier than getting a job.
If the Fed don't realise that their figures are misleading, they are incompetent. If they do - they are crooked.
We are stuck in this economic 'bog' because policy makers failed to engage with the reality of what happened 8 years ago - the bursting of the second great bubble of the twenty-first century. A bubble based upon easy money and debt dependency; created though a corrupt financial system; a financial system protected by a corrupt political system and a group of complicit regulators; a system given intellectual 'credibility' by a bought and paid for academic community. The problems we face are systemic.
US unemployment and inflation figures are designed and manipulated in order to kick the can down the road - to prop up the same rotten system that collapsed 8 years ago. Until that is addressed, we will not have a vibrant economy. We will simply move ever closer to the next collapse - which will come in the bond markets, and through contagion in currency markets. The volatility in capital flows will be very scary.
We need to move forward, but we cannot move forward. Why? Because mainstream politicians, economists and journalists do not have the wisdom or the courage to tell the truth about where we are now. The market will have no such compunctions.