Monday, October 1, 2012

Fed's expansionary policy is not going achieve projected unemployment levels

CS put together an updated chart of the Fed's unemployment projections (discussed here). The expectations for the "longer run" unemployment rate continue to be unrealistic and are based on credit driven excesses of the pre-crisis era. Someone needs to explain to the FOMC forecasters that a structural change in US employment (discussed here) had raised the level of "natural" unemployment rate. Expansionary policy, no matter how aggressive, is simply not going to produce the desired results.

Source: CS

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