Report: Uncertainty Really Weighing on Jobs

According to a report released yesterday by two research advisors at the San Francisco Fed, one solution to the U.S. high unemployment rate might be to simply have a little more faith in our economy.

As manufacturers cut back on investments and consumer sentiment continues to fall, the economists at the Federal Reserve Bank of San Francisco assert that "higher uncertainty is estimated to have lifted the U.S. unemployment rate by at least one percentage point since early 2008."

In past recessions, consumer sentiment has not had as direct an impact, since the Fed has always been able to lower interest rates to lure savers into spending, according to the report.  Now, with interest rates hovering at zero, the Fed is running out of toys and consumers aren't happy with the ones they've got.

Despite signs of improvement, consumers (and thus corporations) have remained far more skeptical of an economic recovery. Even as the S&P 500 and the Dow Jones Industrial Average are up 21% and 18% in the last year, respectively, doubt remains as to whether these gains are here to stay.

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  • Report this Comment On September 18, 2012, at 1:48 PM, divagator wrote:

    First, why does market performance qualify as "signs of [economic] improvement"?

    This strikes me as a spurious argument, particularly given the historic lengths to which the Fed has gone to inflate asset prices (including stocks) and depress yields on debt and savings. Whether such a policy is justified is an open question, but there is no debating that this is indeed the thrust of current federal policy.

    In this environment, even unsophisticated folks sense that there is a disconnect between market performance and what their eyes and wallets tell them every day.

    Second, people don't lack faith in the economy -- they lack faith in a government whose policy actions (or inaction, as the case may be) have largely contributed to the uncertainty in the marketplace.

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