Not surprising that Bullard is surprised!

Apparently, Janet Yellen is a strong leader:

The leader of the Federal Reserve is often described as among the most powerful people in the world. But in late summer, as the Fed weighed whether to raise interest rates for the first time in nearly a decade, Yellen found herself outnumbered.

Yellen wanted to wait. The wild swings in global financial markets over the summer were potentially bad omens for China’s economy — which in turn could drag down America, she feared. But her colleagues were not as worried. A slim majority of the 17 people who make up the central bank’s top brass was willing to start pulling back the Fed’s support for the recovery in September.

One of those was certainly Bullard:

One of the most vocal officials has been St. Louis Fed President James Bullard. He often pushes the envelope of debate at the central bank, and he is the last top official to speak before the Fed’s big decision. In an interview with The Washington Post, he said not raising rates in September was a “mistake” and that the U.S. economy could be ready to take off.

And

WP: When you review the last seven years that the crisis occurred and the actions that the Fed has taken since then, would it ever have entered your imagination in, say, 2007 that the Fed ever would provide as much stimulus as it did for the economy?

Bullard: No, I would not in 2007 — certainly not in 2007, or even 2008 or 2009 — think that we would be in the position that we’re in today. Historically, when you had big shocks, you also had a period of bounce back that was stronger than what we actually got here. I certainly did not predict that things would linger this long, seven years later. I think that’s been the major surprise in the aftermath of the big crisis.

Bullard never imagines that this time around there was no “bounce back” simply because he (and his colleagues) didn´t want one!

First, see the drop and timid rise in NGDP compared to the two previous cycles

Given sticky nominal wages, the wage/NGDP ratio rises strongly and falls slowly

Explaining the much weaker rise in employment

Why, one could ask, did employment rise much less robustly in the 2001 cycle than in the 1990 cycle, given that NGDP (and wage/NGDP) behaved similarly?

The reason is mostly due to the 2001 recession being a “productivity rich” recession.

HT Kevin Tryon, James Alexander