Creating jobs in America -- the Fed Chairman knows something

Were you surprised to learn that far fewer new jobs showed up in December, as compared to prior months?  Most observers--including almost all of the professional prognosticators and economists--apparently were surprised, too, so don't fret about it or lose any sleep over this (not that any of us would).  We're speaking here about this morning's Federal government jobs report for the last month of 2013.   

The funny thing about this is that if we had been well-informed--and paying attention to that information--over the last few days, then we probably wouldn't have been surprised.  Well, maybe mildly surprised, but that's about as far as it would go.

Mr. Bernanke had something on his mind

To get to the point:  Federal Reserve Chairman Ben Bernanke spoke a week ago with some words of warning about the creation of new jobs, but there was little reporting on his speech, and even less critical analysis of what he said.  That's too bad, because Ben Bernanke is one very smart fellow who is also a humble man who speaks carefully, thoughtfully and with understatement.  There is probably nobody else who has a better understanding of the inner workings of the American economy.  He is also incredibly neutral, politically speaking, having been first appointed the Fed's Chairman by Republican President George W. Bush, and then reappointed by Democrat President Barack Obama.  He is leaving the job at the end of this month, so he has now has the opportunity to speak his mind without constraints, if he so chooses.  I think he used this speech as a test platform to see how it feels to speak that way.  I hope it felt good to him.

On Friday, January 3 Mr. Bernanke spoke at the American Economic Association's annual meeting in Philadelphia ("The Federal Reserve: Looking Back, Looking Forward").  Most of the speech was spent on the last eight years, but towards the end he started to look ahead, and that's where things became really interesting.  If you are yawning or drifting away now, take a breath and stick with me a while longer because I'm going to make the critical analysis effort an easy one for you.

Here's what Mr. Bernanke said during his speech that should have given observers pause in crafting their expectations about the creation of new jobs:  ". . . excessively tight near-term fiscal policies have likely been counterproductive."  Said towards the end of his speech, and within the context of other remarks on counting the nation's jobs, this sounds like a subtle warning.  Just prior to the speech's conclusion, Mr. Bernanke said ". . .if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts."

(The speech is available on the Fed's web site; click on this sentence to see it.)

A translation of what Mr. Bernanke said

Here's the analysis:

• "Fiscal policies" are, for you and me, the spending of the Federal Government.
• "Excessively tight near-term" means current Federal spending levels that are lower than he thinks they should be.
• The Fed operates under two mandates:  maximize the nation's employment, and manage the nation's money so that inflation is modest and acceptable.
• When the Fed's Chairman is speaking on the record, he is speaking about either employment or inflation; in this case, he was speaking about employment.

The take-away is this:  in his speech a week ago, Mr. Bernanke was warning that the Federal government's austerian politics have now gotten in the way of job creation, and so future jobs reports--like the one this morning--might not be to our liking.

Mr. Bernanke seems to be saying that the politics of austerity--which have resulted in austere Federal spending ("excessively tight near-term fiscal policies")--are acting now to clamp down on job growth.  Remember the Federal budget "sequester?"  That's the austerity thing, and it's staring us right in the face as we think about job creation.

Look here to see where we're going with this

Sure, it's all well-and-good to want to balance the Federal books and pay down debt, but that's the sort of thing that is best done when the economy is humming along on all eight cylinders, not when it has a couple that are misfiring as they are now.

The elected austerians in Congress would have us believe that additional Federal spending will not create lasting private sector jobs.  That's just not true, and they know it isn't.  Of course, they hope that you don't know that they know that, but all that you have to do is take a look at how hard some of these austerians will fight to keep--as an example--the same or more funding in the Defense part of the budget so that big-ticket military hardware items that are manufactured in their home districts continue to be produced as before.  If that isn't the creation of long-lasting private sector jobs due to Federal expenditures, then I don't know what is.

Congressional candidates should give some good answers to these questions

If Federal monies can be used--and are being used--to create long-lasting jobs that are the favorites of the Congressional austerians, then why not use more such expenditures to create other types of jobs, and make the new jobs number grow?  Why not listen to the counsel of a highly-effective, middle-of-the-road, humble and thoughtfully-spoken Federal Reserve Chairman who--after eight years on the job--certainly has lots of insight to what it takes to make the American economy grow and add jobs?

Those are the sort of questions that should be asked and answered in an election year.

And the fact that this is an election year. . .well, that's for another time.