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The Clear Evidence That QE FAILS to Produce Jobs

Phoenix Capital Research's picture




 

Over the last five years, the US Federal Reserve has substantially changed the investing landscape of the capital markets in the last 12 months. In particular we need to assess how ongoing QE programs affect notions of “risk” and rates.

 

In the period from March 2008 to late 2013, the Federal took a series of strategic steps to attempt to rein in the financial crisis and to support certain financial institutions that it deemed most critical to the health of the financial system.

 

These steps consisted of cutting interest rates to zero and engaging in rounds of Quantitative Easing, commonly referred to as QE.

 

QE in its simplest form consists of printing new money that is then used to buy US debt, called Treasuries. The Fed has made a myriad of claims for why it did this (to help housing, the help the economy, etc.) but the blunt reality is that this policy was primarily a means of financing the US deficit, which swelled in the post-2008 period as the public sector expanded rapidly in an effort to pick up the economic slack in the private sector.

 

The US went into the 2007-2008 Crisis with a national debt of $5 trillion and unfunded liabilities  (Medicare, social security) somewhere in the ballpark of $50 trillion. And as the debt ballooned in the post-2008 era due to Government spending, it became more and more important for the Fed to maintain low rates: any increase in interest rates would mean much larger interest payments on a rapidly growing debt load.

 

This is why the Fed has maintained near zero interest rates as the US nati0nal debt swelled to $16 trillion. It’s also why the Fed continues to engage in QE despite the clear evidence over the last four and a half years that it is not an effective tool for stimulating economic growth or a rise in employment.

 

Regarding this latter point, I want to draw your attention to the labor participation rate below. The official unemployment rate is highly charged politically as it is used by the media to gauge how well a particular administration is doing at generating job growth.

 

As such the unemployment numbers are routinely massaged to the point of no longer reflecting the true number of unemployed Americans. For this reason, I prefer to use the labor participation rate when gauging the health of the US jobs markets: this metric represents the number of Americans who are currently employed as a percentage of the total number of Americans of working age.

As you can see, the number of employed Americans of working age peaked in the late ‘90s. It has since fallen to levels not seen since the early ‘80s. Moreover, looking at this chart it is clear that job creation has failed to keep up with population growth.

 

This negates any claims of “recovery” in the jobs market.

 

In particular, I want to draw your attention to the last five years of this chart below. The US Federal Reserve began its first QE program, called QE 1, in November 2008. Since that time it has launched three other such programs, spending over $2 trillion in the process.

 

 

During this period, the labor participation rate has not once experience a sustained uptrend. Put another way, job creation has never outpaced population growth to the point of creating a significant turnaround in the jobs market. This has happened despite the recession officially “ending” in mid-2009.

 

The evidence here is clear. QE does not generate jobs in the broad economy.

 

For a FREE Special Report outlining how to protect your portfolio from this, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best Regards

Phoenix Capital Research 

 

 

 

 

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Thu, 01/09/2014 - 16:57 | 4316844 dizzyfingers
dizzyfingers's picture

AFTER AMERICA.....GET READY FOR ARMAGEDDON. Steyn

Thu, 01/09/2014 - 11:15 | 4315085 Mike Cowan
Mike Cowan's picture

QE did not produce jobs as measured by the job participation rate.

Thu, 01/09/2014 - 05:13 | 4314655 Rising Sun
Rising Sun's picture

like you need evidence to prove that if you take a shit, it's going to smell

 

the Fed still fucking did it

 

so the real question is why did they do it?  so Barry could get re-elected?  to offset Chinese credit expansion?  to fuck the middle class?  just because?  to fuck Europe and force them into a liquidity crisis?

 

white papering is so fucking useless these days - given enough time/money/effort, facts can say almost anything - opining with some supporting fact is far more useful

 

it's like the big pharma pumping out "kicked back" shit via academics to say vitamins are bad - big pharma - the cigarette companies of tomorrow

 

 

the Fed knew in 2008 they would fuck the system - the question is why did they still do it??

Wed, 01/08/2014 - 23:46 | 4314188 rustymason
rustymason's picture

QE is a complete success. The banksters are super filthy rich and powerful now and no one will touch them. Wait, did you really think it was about the 'ecomony' and 'creatin jobz'?

Thu, 01/09/2014 - 09:38 | 4314913 d edwards
d edwards's picture

And now we're gonna have "Promise Zones"-is that like Twilight Zone?

 

Or promises like:

If you like your plan you can keep your plan

If you like your doctor you can keep your doctor

The average family will save $2500 a year

Wed, 01/08/2014 - 23:43 | 4314176 disabledvet
disabledvet's picture

THEN TAPER WILL BE OUR GLORIOUS VICTORY!

Wed, 01/08/2014 - 22:17 | 4313952 MrMajestic11
MrMajestic11's picture

While the theme of your article is unlikely to engender much controversy in this forum, you might be well served by taking a minute to proofread your writing before posting it.  Even the most elegant arguments fail to gain credibilty when espoused in a second grade vernacular.  Just sayin'.

Thu, 01/09/2014 - 07:13 | 4314711 steveo262
steveo262's picture

Not just writing at a second grade level but check the facts. National debt was greater than 5 trillion dollars in 2007. Do these people manage money?

Wed, 01/08/2014 - 21:59 | 4313881 kenny500c
kenny500c's picture

Why work hard and create a business and jobs when you can speculate with free money and get bailed out if you lose enough?

Wed, 01/08/2014 - 21:44 | 4313834 Westcoastliberal
Westcoastliberal's picture

Hell we KNOW QE doesn't improve the job market one iota, and that's a fact.  Perhaps the question we should be asking is, what DOES QE do?  IMHO it converts taxpayer money into Bankster money, pure and simple and for no other purpose.

Wed, 01/08/2014 - 21:32 | 4313802 nick howdy
nick howdy's picture

Yes, and two males fucking fails to produce a child...Big news here at ZeroHedge..

Wed, 01/08/2014 - 21:21 | 4313778 Walt D.
Walt D.'s picture

Not to worry, extending unemployment benefits indefinitely will create jobs (as long as you count the person receiving unemployment benefits as employed - virtual hole-in-the-ground Keynesianism).

Wed, 01/08/2014 - 21:04 | 4313726 Seize Mars
Seize Mars's picture

Uh, "Over the last five years, the US Federal Reserve has substantially changed the investing landscape of the capital markets in the last 12 months."

Isn't this an example in a grammar book somewhere, like "The door opened, then shut?"

Arg. Whatever.

Wed, 01/08/2014 - 20:21 | 4313547 Fishhawk
Fishhawk's picture

Once you understand that the Federal Reserve is a private corporation created to maximize the harvest of real assets from the public through manipulation of the money supply, you can easily realize that its policies have nothing to do with unemployment, unless you include the continued employment of banker/wankers.  Bankers have maintained an unholy alliance with governments since 1694, and they are not about to hang separately now.  

Fishhawk

Wed, 01/08/2014 - 21:16 | 4313767 Walt D.
Walt D.'s picture

Spot on.

Wed, 01/08/2014 - 20:13 | 4313510 ejmoosa
ejmoosa's picture

Of course there's no evidence that QE boosts job growth.  After a full year of it we have lower growth by month than we did in 2012.

Wed, 01/08/2014 - 20:12 | 4313508 NoWayJose
NoWayJose's picture

The Fed has a dual mandate - to control inflation and to help employment. By their own numbers there is no inflation (and even a fear of deflation) so there is nothing that QE does for that. So if QE also does nothing for employment, then hy have a Fed?

Thu, 01/09/2014 - 02:04 | 4314509 James
James's picture

The Fed had a dual mandate of low inflation/employment but recently changed that to concern for banks only. Look it up.

Wed, 01/08/2014 - 19:54 | 4313444 geno-econ
geno-econ's picture

The Federal Reserve owned by Regional Banks rather than our elected political leaders have the responsibility to maintain employment and economic policy ? Sumptin wrong unless you believe Multinational Big Biz have your welfare in mind and do not practice international tax avoidance . DUH ! Oh I forgot , small business will save the day and the public sector will continue to hire ad infinatum. DUH !

Wed, 01/08/2014 - 18:55 | 4313248 spinone
spinone's picture

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."

I call bullshit.

Wed, 01/08/2014 - 18:37 | 4313200 10mm
10mm's picture

The mandate to help with unemployment is a total fraud from the beginning. 

Wed, 01/08/2014 - 22:02 | 4313890 TheRideNeverEnds
TheRideNeverEnds's picture

I am sure the TBTF VP crowd have hired plenty of yacht captains and butlers; they are making record profits and the FED never said what type of employment they were going to help.... 

Wed, 01/08/2014 - 18:22 | 4313158 Mac Avelli
Mac Avelli's picture

You lost me at the first sentence, "over the last 5 years..in the last 12 months."

 

Thu, 01/09/2014 - 01:20 | 4314431 tardball
tardball's picture

Cut him some slack.  This posting is probably the most words he's typed in his life in the last 100 years. 

Wed, 01/08/2014 - 20:13 | 4313512 Papasmurf
Papasmurf's picture

LOL!

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