Okun’s law, (click here) posited by economist Arthur Okun, states that a 2 percent decline in output will be accompanied by a 1 percent rise in unemployment. That relationship, proven repeatedly over the past several decades, frayed during the recession and the plodding recovery that followed: Unemployment shot up faster than expected in the depths of the crisis, then fell more quickly than would be indicated by anemic U.S. growth.
Now keep in mind QE3 was tied to the unemployment rate. The standard for measuring unemployment is through The Labor Department.
Since QE3 is tied to unemployment, The Federal Reserve is somewhat obligated to conduct an accounting of how the economy was effected by this policy.
October 16, 2013
...A new paper (click here) from the Federal Reserve Bank of San Francisco offers some fresh hope that the labor market is actually doing quite well, that the lower unemployment rate isn’t just a function of people giving up, and that the rate of job creation is gaining momentum.
Economists at the SF Fed tease out six indicators that serve as “excellent predictors” of future improvements in the unemployment rate, and they are even better forecasters than recent changes in the unemployment rate, which is itself a lagging measure. The six measures are listed in the table below, ranked from top to bottom according to their predictive power. The unemployment rate is up top for the sake of comparison....
Has The Federal Reserve come up with new parameters to measure unemployment?
I wouldn't jump for joy just yet, but, a review of these dynamics should be conducted by other Fed Offices and the US Department of Labor.
Mary C. Daly, Bart Hobijn, and Benjamin Bradshaw
In September 2012, (click here) U.S. monetary policymakers explicitly tied future
policy actions to signs of “substantial improvement” in the outlook for
the labor market. They also said that, in deciding whether this
condition had been met, they would consider a broad set of labor market
indicators to augment information on the unemployment rate. In this
Economic Letter, we consider which indicators best signal future
improvement in the unemployment rate. We identify six such leading
indicators of labor market improvement. These indicators reveal that,
while the health of the labor market has not yet returned to its
pre-recession level, there are encouraging signs of positive momentum.
Taken together, these signs point to continued improvement in the labor
market....
