Nobody was happier about this week's unemployment numbers than Ben Bernanke. It will probably save him. Worse than that, thanks to the substantial unemployment adjustments for the past two months, the Fed's unemployment projections for the current quarter suddenly seem entirely reasonable, so I'll eat crow on that one.
And Paul Krugman has it right -- now if you are the Fed, you are convinced you were right and are right that the economy needs no more QE -- see, the unemployment rate is dropping! If you are in the Congress, and last week you said that there was no need for more stimulus, then again you are proved correct!
But this is wrong. For even if unemployment is only 9.1% in one year's time instead of 9.5%, that is still way too high. And even if inflation is 1.8% next year rather than 1.7%, that is still too low. And, in general, the economy needs to add 110,000+ jobs per month to keep pace with the rising population. The moment to start to lighten up on the QE is once we have done that for several months consecutively.
And now we have Bernanke saying that not only is more QE out, but that more stimulus is also a bad idea. And, further then "Bernanke reminded Congress that it has the power to repeal Social Security and Medicare." Here is more: "In testimony before the Senate Banking Committee today, where he’s seeking re-appointment as the Fed’s chairman, Bernanke called for cutbacks in Medicare and Social Security even as unemployment rises and the middle class is endangered."
This is just too much...
We have a Fed chairman committed to doing nothing to an economy with 9%+ unemployment and inflation which is lower than it need be. And a Senate which now gets to vote to confirm Bernanke, basically voting on whether this is acceptable or not.