Not As Much Slack In The Labor Force As Janet Yellen Believes

Fed Moving Targets

The Fed keeps moving their targets when they originally thought it was a good idea to provide forward guidance for markets, then when that guidance was met, they started moving the targets in order to justify pumping more liquidity and stimulus into the financial system for the benefit of the Big Banks.

Labor Slack Argument

So the Fed came up with this ‘slack in the labor force’ argument helped of course by Wall Street or should I say the big banks in this country that are benefitting immensely from maintaining the status quo of easy money from the Federal Reserve. After all it is the banks who came up with this idea of ‘slack in the labor force’ to push the Fed to continue more stimulus, they run the show, yes you got it the bankers run the Federal Reserve. They cry and wine for easy monetary policy, tell the Fed what to focus their attention on regarding pseudo economic issues, and the Fed does their beck and call, the Federal Reserve is about as independent as the drug testing authority presiding over Lance Armstrong’s Tour de France reign. 

The Tail Wags the Dog

It is so bad that basically the Federal Reserve has become the lapdog of the big banks in this country so when the employment target starts to get hit, when the inflation target gets hit, when the economic targets get hit, go to the ole undefinable, mystical, hard to quantify ‘slack in the labor force’ card to justify not raising rates when we are producing more jobs in the country than at any time in the last 17 years. And mind you this included the robust tech explosion, the housing boom, and the credit booms of the last 17 years, and we never created this many jobs on an annual basis, and the Fed Funds Rate wasn`t zero, or 1, or 2% but 5.5%. What the hell is going on at the Fed, they cannot seriously believe policy is anywhere near where the economy is actually performing when compared to any other time in the entire history of the economy and the Federal Reserve Monetary Oversight Function!

What does it really constitute?

So let`s talk about this mercurial ‘slack in the labor force’ participation rate what the hell does it really signify, and how does it relate to the actual real time job market. The idea is that the economy has been so bad that a bunch of workers became so discouraged that they stopped looking for work, left the workforce entirely for six years mind you, and once the labor market gets significantly tight, employers will be forced to raise salaries, lower hiring standards, change the requirements of the positions, or retrain workers which will bring these people back to the land of ‘Documented Employed Workers’.