Guest Post: Bernanke’s Jobs Estimate

Tyler Durden's picture

Submitted by John Aziz of Azizonomics

Bernanke’s Jobs Estimate

Ben Bernanke at Jackson Hole:

If we are willing to take as a working assumption that the effects of easier financial conditions on the economy are similar to those observed historically, then econometric models can be used to estimate the effects of LSAPs on the economy. Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board’s FRB/US model of the economy found that, as of 2012, the first two rounds of large scale asset purchases may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred.

Bernanke’s estimate of two million jobs created as a result of his policy appears to be a stitched-together estimate based on two research papers: Fuhrer which estimated a gain of 700,000 jobs from QE1, and Chung et al which estimated 1,800,000 jobs.

The methodology here is interesting, to say the least. From the (unfortunately titled) Fuhrer paper:

Given the range of estimated effects on real spending (GDP), the translation to employment effects is accomplished by use of an Okun’s Law relationship that links GDP growth and changes in the unemployment rate. The typical relationship expressed in quarterly changes is summarized as: Change in unemployment = -0.125 (GDP growth – potential GDP growth).


GDP growth for one-quarter that exceeds potential GDP growth by 1 percentage point results in a one-eighth (0.125) percentage point decline in the unemployment rate. Equivalently, quarterly growth in GDP that exceeds potential growth by 1 percentage point for a year typically lowers the unemployment rate by about one-half percentage point.


Combining this simple Okun’s Law with the estimated effects on GDP discussed in the preceding section implies a decline in the unemployment rate of 30-45 basis points over the 2-year period it takes for the spending rate change to feed through the economy. With the U.S. labor force currently at just over 150 million people, this translates to an increase of about 700,000 jobs, a figure quoted by Boston Fed President Eric Rosengren in his speech of November 17, 2010.

The number of layers of uncertainty is problematic. First we have uncertainty over the level of GDP growth provoked by QE. Second we have uncertainty as to the reliability of the measure and concept of potential GDP growth. And third we have uncertainty as to the extent of the relationship between GDP growth, potential GDP growth and unemployment in this specific case.

Essentially, the equation assumes that because GDP growth has historically resulted in job growth, we should assume it will do so in the future. But this is a very different economy to the one we had fifty years ago. Today it’s possible for the financial sector to generate profits (and thus, GDP) by passing liquidity around the financial sector. And today, any American demand boom will create jobs in China and Mexico (etc), because that’s where the industrial and manufacturing jobs have been shipped to.

So Bernanke’s figure is a guess based on a guess based on a guess based on old data. Maybe 2 million. Maybe, maybe, maybe, maybe.

How do we know that after a big, painful bust that after a short burst of deflationary pain that job growth wouldn’t have come roaring back? After all that happened multiple times in the 19th century.

Hank Paulson might claim that he saved the world from a thousand year nuclear winter by bailing out his former employee Goldman at par on its credit default swaps. You can claim anything about what might have happened otherwise. Maybe, maybe, maybe. Such claims are junk science because they are unfalsifiable.

Yet the reality is very clear — either people have jobs or they don’t. That’s what the regime will be judged on.

The present policy of tripling the monetary base via monetary easing hasn’t solved the jobs problem, because we’re still in the woods. Trillions of easing — which we can say quite confidently has enriched the financial sector far more than any other sector of the economy — and yet we still have a jobs depression (of course, financial sector profits have come roaring back). This is the prime age employment-population ratio:

Quantitative easing hasn’t been about jobs. If this was about jobs or stimulating demand, Bernanke would have aimed the helicopter drops at the wider public, as many economists have suggested. This policy of dropping cash directly to the banks is bailing out a dangerous and morally-hazardous financial sector and too-big-to-fail megabanks that remain dangerously overleveraged and under-capitalised, needing endless new liquidity just to keep past debts serviceable. There has been plenty of cash helicopter-dropped onto Wall Street, but nobody on Wall Street has gone to jail for causing the 2008 crisis. Criminal banksters get the huge liquidity injections they want, and the rest get less than crumbs.

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prains's picture

would you like to upsize?

UP Forester's picture

I think they should just say they created 300 million jobs, or every job since 1971.

All the damn numbers are as fake as fiat anyhoo....

Michael's picture

They won't report this on MSM TV, I wonder why?

Unreported World - America - Down and Out

1 Million Homeless Students In US

USA tent 'cities' on rise as US economy crumbles (23Dec11)

Meesohaawnee's picture

because the msm is the fed's lapdog. The goal being to knive the public into thinking qe is good, stimulative. Its far from stimulative. The use of that word in that context makes me puke

boogerbently's picture


"So Bernanke’s figure is a guess based on a guess based on a guess based on old data. Maybe 2 million. Maybe, maybe, maybe, maybe."


....sounds like the "evidence" for evolution, to me.


The cries from the populist movement are responded to, eventually, by politicians.

I've always wondered why the banks get the $$$ and WE need to pay it back!!!

Let's have ALL "Trillion$$$" from bailout/QE/Twist... repaid by the TBTF, as determined by a "Payback Czar".


GetZeeGold's picture



I'm guessing Ben Shalom's estimates are a lot higher than mine.


EvlTheCat's picture

Only in America "poor" people weigh 300 pounds.

qqqqtrader's picture

even if you use their numbers...

no jobs have been created

Employment Level from BLS

Jan2009 = 142,187,000

Aug2012 = 142,101,000


dbomb12's picture

Chart from John Williams at Shadow Government statistics shows REAL unemployment at 23%. That number is more believable

oleander garch's picture

Does not the Chairman's argument also mean that he and monetary policy  - not President Obama and his stimulus policy - should get the credit for essentially all the job creation under the Obama Administration? 

PY-129-20's picture

Remember "Free labour is better than cheap labour"? Seems even that didn't 't work...Goodbye CEO Textor...

"Last Tuesday, Digital Domain (DD) released an announcement saying it had defaulted on a payment to a $35 million loan as well as some accrued interest of another $16 million. Digital Domain is closing operations in Port St. Lucie, the company announced Friday morning. The Los Angeles and Vancouver studios are healthy and ongoing. The Digital Domain Institute, based in West Palm Beach is said to be in good shape.
According to a news release, Digital Domain Media Group will be "reducing virtually its entire Port St. Lucie workforce, retaining approximately 20 employees who will remain as part of the wind-down."

Manthong's picture

They may very well do domething like that.

But don't be surprised if that is after they try to mandate all of your gold into the government's hands at current suppressed prices or attempt to impose a 95% windfall prifits tax on gold.

Note my usage of the words "try" and "attempt".

robertocarlos's picture

So even if you are lucky enough to have found a Spanish chest full of gold Eagles at the bottom of Lake Minnetonka you'll be taxed to death.

trebuchet's picture

of course you will.  coz the tax authorities knew it was there in the first place and knew it when you found it and so prepared the tax bill. 


boogerbently's picture

Richard....any relation to Bertrand??

Gold to $10,000 is EXACTLY what I'm (hoping for) betting on.

Sell gold equities pre-Nov. election, buy physical pre-WWIII/USDabandon/return to gold standard. 

Ineverslice's picture

Catherine's the bomb... i always take a listen to what this gal has to say.

Jason T's picture

the rest of us get $3.96 gas


Seasmoke's picture

i just read an article TODAY, that gas prices have dropped a few pennies the past 2 weeks.....MY EYES have seen gas prices go up .30 the past 2 weeks (and i have receipts to prove my eyes are not failing me !!!)......the lies are coming faster and faster now

boogerbently's picture

....believe only half of what you see, and 100% of what you hear/read from the MSM.


yogibear's picture

Benny Bernanke is a Wall Street tool. Goldman tells him to dance and he dances.

Benny uses ammunition now and at the end of the he will be shooting blanks when the cliff comes.

The Market is already in a QE euphoric state.


The Axe's picture

Fight Club....never let a scumbag tell you its about jobs....  or we have a strong dollar policy....just buy ammo and gold...cause you will need it!!!

Bicycle Repairman's picture

"Quantitative easing hasn’t been about jobs. [....] This policy of dropping cash directly to the banks is bailing out a dangerous and morally-hazardous financial sector and too-big-to-fail mega-banks that remain dangerously over-leveraged and under-capitalized, needing endless new liquidity just to keep past debts serviceable."

When will the next QE occur?  When the banks need it to stay solvent.  And nothing is going to mitigate this printing.  Not inflation or anything else about the real economy.

FRBNYrCROOKS's picture

QE is about printing enough money to enable RePurchase Agreements so bank can appear solvent when they are actually bankrupt.

Without the REPO we would see who has a swimsuit when the tide goes out. 

QE is keeping the tide high so we won't see the truth.

boogerbently's picture


But the Lakers got Dwight Howard, so............

Atomizer's picture

Yo When things git closer ta da election date, Department o' Hoe Sexuality will be playing uh song from 1978. Many will stare into each others peeps thinkin`, how did we's arrive ta dis here phony bullshit illusion Ya' dig? 



Ben, you’re a man who studied the depression. You have succeeded in pitching your thesis outcome. Bravo!!

AllWorkedUp's picture

Only one way to handle these bastards. String em' up!

Dr. Engali's picture

The argument: " but it could have been so much worse" drives me insane every time I hear it. Here we are four years later and it's only getting worse. If we would have ripped off the band aid we could be rebuilding, instead the market distortions get larger, the anger grows deeper, and the eventual outcome is going to be much worse.

fonzannoon's picture

We need one nice big burp of inflation. This frog in warm water shit is working too well. People are going to have to get their balls shocked a bit. Maybe that well snap em out of this malaise. But the frog in warm water scenario is working so well....why stop?

sosoome's picture

What we need is to leave it alone and let it deflate like it wants (needs) to do. It'd be painful, but the dead wood would be removed much quicker.

A Lunatic's picture

and the eventual outcome is going to be much worse.



You mean something like this perhaps?

When The Music Stops – How America’s Cities May Explode In Violence 

Dr. Engali's picture

That was a pretty good link. Thanks.

spentCartridge's picture

Grand Theft Auto, bitchez ...

CDSMonkey's picture

Seriously, why not give everyone $1 million and let trickle up work

nmewn's picture

Conceptually, I think the problem is "give".

It still leaves the idea that government is greater than the individual. Its not. Governments and their assorted currencies have risen and fallen for centuries, the people always remain. They will admit their arrogance, defeat and deceit to us and return the respect of our own labors to us, to do with as we please, (debt free) or in my opinion, we stay on strike and they can print itself into oblivion again. 

Their choice...and there has never been or ever will be a compromise over this.

fonzannoon's picture

In the meantime...come visit NYC, check out the village. Enjoy the group setting. Leave your car at home...

Dr. Engali's picture

Hey Fonz check out the link that A Lunatic provided in a reply to my previous post. Be careful in New York.

fonzannoon's picture

That link scared the shit out of me.

Dr. Engali's picture

Yeah me too. After I read that I hit your link and thought ... "holy crap and this is with the ebt cards currently working...."

Shell Game's picture

+1  Much better than I could have said.  When .gov gives, it really means they take.

sessinpo's picture

Perhaps because that would actually be money circulated in the economy instead of being held by financial institutions. Such a huge influx of circulated money would be hyperflation and your $1,000,000 gift might buy you a loaf of bread.

ebworthen's picture

Ben Bernanke, PhD, does not get the most basic of concepts.

"Debt spending and bailing out the drunk nephew/uncle/child does not create positive results for the rest of the family."

Figure it out you DUMB FUCK!

Pure Evil's picture


From the (unfortunately titled) Fuhrer paper:


Sieg Heil anyone?


Oh my, the Reichstag is burning again.

Amish Hacker's picture

This whole line of reasoning is just blatant self-justification for a policy known to have failed, dressed up with a lot of pseudo-academic numerology.

If we hadn't had the arms race with the Soviets, we would have had a nuclear war.

If we hadn't invaded Iraq, the Midle East would be in even worse shape than it is.

(Add you own examples here...)


FRBNYrCROOKS's picture

Make REPurchaseAgreements against the law and all banks would fail tomorrow.


DavosSherman's picture

Unemployment is 23.8%.  Who the fuck in their right mind gives a flying shit about what Bernanke thinks or says.  The guy is a corrupt POS lying moron.