Dear UCubed Leader:
A debate now rages within the Federal Reserve over inflation. Should the inflation target be less than 2 per cent per year, remain at 2 percent per year or be allowed to grow to 4 percent per year? It is a macroeconomic debate that only the investor class follows closely. But the unemployed have a huge stake in that debate, too.
Oddly, the investor class keeps asking the equivalent of how many angels can dance on the head of a pin. They argue whether or not unemployment has dropped low enough. And that’s inane. The official unemployment rate (6.7 percent), the U-6 rate (12.7 percent) and the real unemployment rate (14.7 percent) which includes those who haven’t looked for a job in a year – all three are too far from full employment (4 percent).
Once again, the investor class is asking the wrong question. They should be asking how many pins are being manufactured.
We need more pins – places for the unemployed to go to work – and that takes more investment, public and private, new ventures, new businesses and newly-empowered consumers with money in their pockets. That can only happen if the banks, brokers, venture capitalists and corporate titans start investing in America again instead of shipping capital to the four corners of the earth to avoid paying taxes or make a few more basis points in profit.
America faces a molasses slow recovery. Job growth averaged 174,000 per month in 2011; 186,000 per month in 2012; 194,000 per month in 2013; and 177,000 for the first three months of 2014. None of those figures come close to population growth which averaged 218,000 Americans per month since the start of the Great Recession.
Our workforce grew from 153.1 million in 2007 to 155.8 million today. That’s anemic growth. What should frighten the Federal Reserve are two facts. First, real unemployment stands at 23.8 million including, as explained above, those who haven’t looked for a job in the last year. Second, the number of Americans not-in-the-workforce has exploded from 78.7 million in 2007 to 91.6 million today – an increase of 13.1 million.
Do the math. Real unemployment plus not-in-the-workforce equals 36.9 million Americans! Talk about depressing. Actually, that IS what keeps depressing this economy. Subtract that many consumers and the engine of growth sputters and comes to a halt eventually.
So, for America’s NOT working class, the Federal Reserve internal debate boils down to abandoning its efforts to stimulate the economy in order to keep non-existent inflation pressures in check. In reality, low inflation means lower interest rates and, consequently, the lowest incentives to invest in new industries, new ventures and new businesses. Quick and fast investors may like low inflation to protect their assets but their incessant greed is throttling our economy.
Since most Federal Reserve decisions are not felt immediately, the internal debate is really about what the economy will look like in late 2015 and early 2016. It will play havoc with presidential campaigns. But, far more dangerous, will be the microeconomic impacts of the Federal Reserve’s shift from a jobs advocate to an inflation fighter.
What little hope the long-term unemployed had of ever getting a job that matches their skills will vanish if the inflation hawks win the debate inside the Federal Reserve. So tell the Federal Reserve Chair Janet Yellen not to shift focus until we reach full employment. Tell her your story. Tell her what it is like to be unemployed for six months, 12 months, 24 months or more.
From her past speeches and current actions, Janet Yellen has been on our side. We need to give her the ammunition she needs to win this debate. So write her today.
In Unity — Strength,