The Federal Reserve has adopted QE3 to get the unemployment rate down. But how long will this take?
Here are the basics of employment. Every month, the working-age population grows by 100,000 people.
To get the unemployment rate to 6% will take job growth of at least 250,000 a month for at least four years.
Month after month, the increase in the number of jobs hovers around 100,000. So, the unemployment rate does not go below 8%.
Problem: orders for goods are dropping . Manufacturing is headed into the pits. In Chicago, it is at a 3-year low.
Nationally, new orders in the ISM index — widely respected – in August fell to 47.1. That puts it back to its August 2009 level.
Recession in Europe is hurting. U.S. exports.
The “fiscal cliff” looms on January 1: spending cuts and tax hikes. Spending cuts are long overdue. Keynesians oppose them. Tax hikes are likely to slow the economy. Supply-siders oppose them.
Congress may sit tight. A lame-duck Congress could kick the can by extending Bush’s tax cuts, which expired in 2010, but which were extended. It seems hard to believe that Congress will allow spending cuts, meaning reductions in projected increases in spending.