Tags: Fed | Jobs | Rebound | labor

NY Fed Researchers See 2013 Jobs Rebound

Friday, 30 March 2012 08:06 AM

The jobless rate could come down more quickly than many people believe, say New York Fed researchers in a new working paper — possibly within the Fed’s mandated target of 6 percent during 2013.

The Fed’s inflation target is 2 percent and it seeks an unemployment rate of between 5.2 percent and 6 percent. It is out of bounds on both, but a recovery in jobs is clearly U.S. Federal Reserve Chairman Ben Bernanke’s first priority, based on recent statements he has made.

Using a metaphor of a bathtub (and plenty of math), Ayşegül Şahin and Christina Patterson explain the job market as a tub being filled while the drain is open. During a recession, the tub fills faster than the drain can empty. Unemployment rises quickly and stays high.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

In recoveries, the flow of unemployed workers slows and the drain (in the form of newly hired workers) takes over. Looking at past recoveries, that draining action can be underestimated, they write. “Simulations based on historical patterns suggest that the fall in the unemployment rate could be quicker than many forecasters predict,” they contend.

The researchers look at the “outflow effect” of new hiring in recoveries following the 1981-82, 1990-91, and 2001 recessions. “In all three scenarios, the unemployment rate declines to around 6 percent by the end of 2014. Indeed if the inflow and outflow rates improve at the same rate as they did in late 1993 and 1994, the unemployment rate will fall to close to 6 percent by early 2013,” Şahin and Patterson write.

“In contrast, the March 2012 Blue Chip consensus forecast has unemployment remaining above 7.5 percent through 2013.”

New claims for jobless benefits have hit a fresh four-year low, down 5,000 to 359,000, says the Labor Department. Nevertheless, more than 7.1 million people were on unemployment benefits during the week ending March 10.

More than 12.8 million are unemployed, meaning a national jobless rate of 8.3 percent. The economy is missing an estimated 5 million jobs since the recession began.

Editor's Note:
You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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Friday, 30 March 2012 08:06 AM
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