Former CEA Chair Ed Lazear was doing a reasonable job of explaining the “Jobless Disaster” up to the last paragraph:
The Fed may draw two inferences from the experience of the past few years. The first is that it may be a very long time before the labor market strengthens enough to declare that the slump is over. The lackluster job creation and hiring that is reflected in the low employment-to-population ratio has persisted for three years and shows no clear signs of improving.
The second is that the various programs of quantitative easing (and other fiscal and monetary policies) have not been particularly effective at stimulating job growth. Consequently, the Fed may want to reconsider its decision to maintain a loose-money policy until the unemployment rate dips to 6.5%.
The Fed has not maintained a loose-money policy. Inflation is far below target, even with all the caveats unemployment is way above normal and, most importantly NGDP is far beneath any reasonable trend level. In fact, in the last few weeks with the disconnected talk about ‘tapering’ purchases, the Fed has tightened policy (see Lars).
The following chart helps to explain why the employment situation is a “disaster”. In short, the Fed is not being effective, and the thresholds adopted last December may be increasing confusion about future policy. The chart indicates that the employment situation could be markedly improved if the Fed changed its targeting regime and adopted an NGDP level target. Just picture where we would be if the policy had been adopted three years ago! One think I know: Krugman would have stopped moaning about the need for fiscal stimulus a long time ago!