I find it strange that Tim Duy of “team TKD” (Thoma, Krugman & DeLong) would have this to say about a Fed reaction to the employment numbers (my bold):
Bottom Line: Another good report, although still suggestive of the beginning of recovery. In my mind, true recovery will come when the cyclical declines in labor force participation are further reversed. At this point, there is no reason for the Fed to pull their foot off the gas. On net though, the employment report does push back the timing of any additional easing. The Fed will move to the sidelines while policymakers assess the level of slack in labor markets. If the cyclical downturn resulted in sustained structural damage, there may be little slack. But if an influx of returning workers puts a floor under the unemployment rate, the Fed will have more work still to do.
Maybe he´s just “paraphrasing” Bernanke´s recent “mumblings” at the H-H Congressional Hearing:
The dual objectives of price stability and maximum employment are generally complementary. Indeed, at present, with the unemployment rate elevated and the inflation outlook subdued, the Committee judges that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives. However, in cases where these objectives are not complementary, the Committee follows a balanced approach in promoting them, taking into account the magnitudes of the deviations of inflation and employment from levels judged to be consistent with the dual mandate, as well as the potentially different time horizons over which employment and inflation are projected to return to such levels.
Appears to be “classic Phillips Curve” reasoning! And I loved the “balanced approach” quip. Being jokingly “conspiratorial”, maybe all this “slack being cut” to the Fed is just a means to avoid “proving” that monetary policy can be of much greater help than fiscal policy, which is “team TKD” preferred policy choice!
These posts are relevant to the matter: