So many workers have left the job market in recent years that the decline in the official unemployment rate to 7.4 percent last month may understate the extent of weakness in employment prospects.
This gives Federal Reserve officials considerable room to keep interest rates near zero, potentially well beyond current expectations of rate increases beginning in 2015.
Combined with low inflation, a more aggressive Fed might actually see depressed rates of participation in the job market as an impetus for further monetary easing, particularly if they think more working-age Americans have simply given up looking for work after repeated rejections.
For now, officials seem gun-shy about further purchases of U.S. Treasuries and other assets, a practice designed to stimulate the economy by driving down long-term interest rates, and appear inclined to decrease them later this year."The official unemployment rate to 7.4 percent last month may understate the extent of weakness in employment prospects." Ya think?
All in one short sentence, these four words: employment ... weakness ... extent ... understate....
Those are not words one likes to see in one sentence if one is running for re-election.
Sort of like four words in one sentence an airline CEO does not like to see in a news story: runway ... short ... crash ... error....
Especially if it's his airline.
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