If one takes the mainstream media seriously, Ben Bernanke’s announcement that the Federal Reserve would begin “tapering” its purchase of government bonds and mortgage securities by $10 billion dollars per month was the reason for Wall Street’s rally on Wednesday.
Yet as the chart here reveals, the reaction to the Fed’s decision was a rapid and precipitous drop first, followed by a large rally, when Bernanke dropped the far more important shoe: interest rates would remain near zero for the foreseeable future. Thus, the nation remains wedded to a policy best described by Andrew Huszar, who was responsible for executing the first round of Quantitative Easing (QE), as “the greatest backdoor Wall Street bailout of all time.”
And while Wall Street has flourished, Main Street remains mired in the “new normal.” It is the new normal where a staggering 75 percent of the jobs created this year have not only been part-time, but low-paying. It is the new normal where the “decline” in unemployment to 7 percent is belied by the reality that a record high 91,541,000 of Americans are no longer in the labor force as of October, and the workforce participation rate is 63 percent, the lowest its been since 1978. Some of that decline can be attributed to Baby Boomers retiring, but the participation rate of workers aged 16-54 also declined during the recession—and has yet to recover.
And that’s assuming the figure of 7 percent unemployment itself hasn’t been manipulated, apart from not counting those who are no longer looking for work. The House Committee on Oversight and Government Reform has initiated an investigation into a New York Post report that employment data leading into the 2012 election may have been deliberately manipulated. “Just two years before the presidential election, the Census Bureau had caught an employee fabricating data that went into the unemployment report, which is one of the most closely watched measures of the economy,” writes the Post’s John Crudele. “And a knowledgeable source says the deception went beyond that one employee—that it escalated at the time President Obama was seeking reelection in 2012 and continues today.”