Retail Sales, Prices, jobless Claims and the Federal Reserve (or Ben Bernanke)

CPI Retail sales month over month growth

The Census Bureau released their initial estimate of retail sales for August, coming in up 0.9% over the prior month.  Simultaneously, the Bureau of Labor Statistics released their inflation figures, coming in up 0.6% for consumers and up 1.7% for producers on a month over month basis.  Yesterday, government bean counters released their initial and revised estimates of initial and continuing unemployment insurance claims for the prior weeks.  This week’s initial unemployment claims figures came in at a seasonally adjusted 382,000, an increase of 15,000 or 4% over the revised prior week’s number.  The continuing claims figures came in down 49,000 from the revised 3.324 million of the week prior to the prior week.  The results are not at all surprising.  Overall, initial claims are down about 1,000 below where they stood at the end of 2011 (0.3%), whereas continuing claims are about 323,000 below where they stood at the end of 2011 (9.0%).  Combine these weak labor market figures with the unemployment rate, and one gets a pretty good picture of a fairly poor labor market.


intial claims 2012
Continuing Claims 2012

With these figures of increasing inflation, decent retail sales, and a very poor labor market conditions in mind, consider Federal Reserve Chairman, Ben Bernanke’s public announcement yesterday to, among other things, perpetually meddle through what is known as QE3 or quantitative easing, keep savings rates below market clearing rates until 2015, and turn into a Pollyanna on economic conditions.

unemployment rate 20111-2012

Is Ben Bernanke’s Federal Reserve doing any good with their continued meddling?  Maybe; the perpetual $40 billion per month announcement appears to have been moderately well received by investors, and the promise to keep short term rates low through 2015, in addition to giving their best effort at manipulating certain long term rates through 2015, doesn’t appear to have caused a lot of concern among a majority of investors.  Additionally, turning the publicity arm of the Federal Reserve into a Pollyanna-type cheerleader is something that has some theoretical academic backing.  It’s also not the first time the Federal Reserve or Ben Bernanke has played the cheerleader role.

Because most professionals don’t think the actions will have much effect on the real economy, the real question among professionals is not whether the Federal Reserve will have a small negative or small positive marginal effect, but rather whether there’s a better way to let things work out.  Is there a better way of doing central banking and money supply management?  The chart above and repeated below, which includes the detrimental government effect, shows where the unemployment has been over the past couple of years and where it should be at this point of a recovery from a deep financially induced recession.  As is shown, the meddling of the Federal Reserve and federal government continues to induce a higher unemployment rate than what otherwise would be.  What’s more concerning is that the trend of the detrimental effect is going up, rather than declining.

In any event, the answer to the usefulness of Ben Bernanke won’t be answered here, but the simulated detrimental effect is something worth considering.  On December 23, 2013, the Federal Reserve will be celebrating its 100 year anniversary.  Is there a better way to celebrate the Fed institution than to lighten its burdens by shifting some of its responsibility to individuals with less of a meddling personality?

unemployment rate 2012 monthly data