That didn’t take long. The Fed’s unpaid PR flack at the Wall Street Journal, Jon Hilsenrath, was out with hardly an hour to spare after the August jobs report—relaying word from the Eccles Building that ZIRP is in no danger of being rescinded early.
When at the July meeting our monetary plumbers saw “significant underutilization of labor resourcesâ€, which is code for continued zero interest rates, they were looking at an unemployment rate in June of 6.1%.  So according to Hilsenrath, today’s weakish jobs report is good news for Wall Street’s free money crowd.
The fact that unemployment hasn’t fallen since the July meeting —and that job growth slowed in August— suggests Fed officials won’t make big changes to their policy statement and the signal they’re sending about rates when they meet Sept. 16 and 17.
Indeed, the Fed’s other unpaid spokesman, Steve Leisman at CNBC, had already made the point within minutes of the release. ZIRP will now last until next July, he opined. The danger that money market rates would rise, to say 40 bps, as early as March has been alleviated by the “disappointingâ€Â 142,000 print for August. Whew!
These people are counting angels on the head of a pin. Like Draghi’s 10bps cut yesterday, a potential delay in baby-step rate increases by three months next year is a meaningless irrelevance. That such microscopic moves could be treated with dead seriousness by the financial media and players in the casino is simply evidence of how deep the cult of Keynesian central banking has insinuated itself into the warp and woof of the financial system.
The truth is, labor market “slack†is a red herring. The problem of tepid growth in jobs and incomes is structural, and tweaking the monetary dials by a tick or two will not alleviate it in the slightest. Compared to 25bps from zero, consider what has really happened to the labor market since the Fed went all-in for money printing after the dotcom crash. Back then there were 75 million adults (over 16 years) who didn’t have jobs; today’s report shows that there are about 102 million jobless adults.
