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Monetary Police And The Federal Reserve

863 words - 4 pages

According to David Nicklaus of the St. Louis Post-Dispatch in the article published 21 March 2014 “Fed’s unemployment goal turned out too easy to reach; Guidance is less quantitative and may be hard for market to understand,” last month the target unemployment rate set only fifteen months ago by the Federal Reserve was reached and is expected to further increase by .2 percent within a month. This goal was set with intentions to measure the confidence of job-seekers by the number of “active seekers,” which may be obtained by analyzing the unemployment rate. Originally, the target was expected to be reached two or three years after being set.
Consequently, the Fed decided not to announce a ...view middle of the document...

In this way, the Fed is capable in taking action to avoid economic growth which may unsustainable and cause a downturn too rapid and immense for the economy to recover from and then continue to grow.
The latest goal, however, this proves an inadequate representation of economic health. Although Americans are more actively seeking jobs at an unexpectedly high rate, the economy may not be ready for an increase of short-term interest rates.
The rising unemployment rate may show beneficial changes to the economy such as more confidence which combats the discouraged workers effect. This concepts means the sense of defeat and consequential decrease in the actively seeking labor force, which typically relates to the cyclically unemployed, who lost their jobs due to an economic downturn. However, there are a number of factors which are left unconsidered in the unemployment rate. It is important to remember that this rate is measured by the actively seeking unemployed workforce divided by the total work force, multiplied by one hundred. To explain “actively seeking,” this was defined during the Great Depression and includes the unemployed which either directly contact employers, attend interviews, send out résumés, or fill out job applications each month. Thus the unemployment rate leaves a number of factors unconsidered, which may help to represent a healthy economy.
One of these unconsidered factors is underemployment, meaning the workers who are working significantly below their skill level or for fewer hours than desired. Although the unemployment rate...

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