Salient to Investors:

A. Gary Shilling writes:

  • The Fed has yet to achieve its dual mandate of price stability and full employment.
  • QE had been tried by the Bank of Japan for years without notable success, but Western central banks have become increasingly desperate as they look for ways to create jobs.
  • Central banks can only  raise or lower short-term interest rates, and buy or sell securities – a long way from creating more jobs.
  • There have been virtually no follow-on effects from the Fed’s creation of member bank reserves. Since August 2008, the multiplier has been only $1.5, and excess reserves now exceed $1.9 trillion.
  • If real annual GDP growth averages 3.5 percent in the years ahead and productivity growth averages the 2.5 percent of the past decade, employment would increase 1 percent a year, or 1.44 million jobs at current levels. But the pool of 14.5 million available workers plus the annual increase in the working-age population of 2.2 million annually exceed the 1.44 million new jobs.
  • In the last 3 decades, many manufacturing and similar jobs have moved to Asia, so a greater share of Americans now holds service and technical jobs that tend to suffer longer stretches of unemployment.
  • Cost-cutting has been the route to pushing profit margins to all-time highs and thus employees have suffered both limited job growth and declining real wages.
  • The BLS reports that its monthly jobs total can vary by plus or minus 90,000.

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