Yellen’s Testimony Reax

Janet Yellen, with her testimony on Tuesday, has given Congress and the public her initial framework on how she will run the Federal Reserve. Here is a roundup of takeaways by some observers:

Tim Duy sees Yellen’s testimony as a continuation of Bernanke’s policies:

“Yellen reiterates the current Evans rule framework for forward guidance, giving no indication that the thresholds are likely to be changed. Jon Hilsenrath at the Wall Street Journal interprets this to mean that when the 6.5% unemployment rate threshold is breached, the Fed will simply switch to qualitative forward guidance.”

Meanwhile, the market reaction was muted although slightly positive:

“The stock markets rose in the morning following the release of Ms. Yellen’s testimony, and again when she began to speak. Some analysts speculated that investors were reassured by the message of continuity. The news that House Republicans planned to allow a debt ceiling increase reinforced the good mood on Wall Street. The Standard & Poor’s 500-stock index rose 19.91 points, or 1.1 percent, to close at 1,819.75. Similarly, the Dow Jones industrial average rose 192.98 points, or 1.2 percent, to close at 15,994.77. The Nasdaq composite increased 42.87 points, or 1 percent, to 4,191.05. In the bond market, the yield on the Treasury’s 10-year note rose to 2.73 percent, from 2.67 percent late Monday. Its price fell 16/32, to 100 6/32.”

And one of John Cassidy’s takeaways from Yellen’s testimony on Tuesday was that:

“She’s not buying the “structural unemployment” story. At several points during the hearing, Yellen pointed out that there is still a lot of “slack” in the labor market, despite the fact that the unemployment rate has fallen to six and a half per cent. In support of this proposition, she pointed to the ranks of the long-term unemployed, which haven’t thinned out much at all; the large number of people—more than five per cent of the labor force—who are working part-time for economic reasons; and the failure of wages to keep up with productivity growth. Only “a small portion” of the rise in unemployment can be attributed to structural factors, such as the mismatch between workers’ skills and the jobs that are available, she said. Although it might seem a bit technical, this argument is a crucial one. If unemployment is largely cyclical, as Yellen believes that it is—and I agree with her—the Fed, by stimulating demand, has the capacity to bring it down further. If joblessness is now mainly a structural phenomenon, more monetary stimulation won’t have much impact.”

Overall, Fed Chair Yellen has focused on continuity with her predecessor Ben Bernanke while also stressing that there is much more to be done at the Federal Reserve in regards to unemployment. This is a mixed bag. Acknowledging the problem is the first step toward a solution.

But it is far from enough. The jobs crisis is the most damaging issue in America today, just as it has been for over five years now. Half a decade is far too long from America to suffer, a dereliction of the duty of economic leadership the likes of not seen since the Great Depression. Against this backdrop, another year of “moderate” improvement is a cruel joke on the millions locked out of the workforce by insufficient demand.

Our leaders, Chair Yellen included, need to move from just seeing and accepting this mediocre “improvement” that won’t even get our number of per capita jobs to where they were in 2007. Tell our leaders enough is enough.: Fix the Jobs.

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