Dismal Unemployment Numbers

So, met with dismal unemployment numbers for December, will the Fed, or their conservative backers, update their priors and say to themselves "look, the job market is still much, much worse than we thought, let's pump another $350 billion into the economy and see what happens..."

Or will they just continue on autopilot?

If we see two to three months in the 150K to 200K plus range, I would be changing my tune, and saying we don't need any more QE, and that we should start to reverse the stuff we've got in place.

But we just haven't turned the corner yet.

Let's be clear what these numbers mean -- since last summer, the Fed has been making more-or-less clear-cut policy errors. Each month, the Fed gets worse numbers than it thought. It reacts to these numbers by ... continuing on the same path it had when it thought things were better. Ben Bernanke believes the same thing Wednesday as he did Monday, no matter what the BLS announced Tuesday.

This is serial incompetence.

And, it extends to Larry Summers and the Obama administration. How much longer will they pretend that the stimulus was "just the right" size?