Yellen’s “Arranged Marriage” To The Fed

Recently, President-Elect Joe Biden named Janet Yellen to be his administration’s Treasury Secretary. Yellen quickly proclaimed the reason “I became an economist was because I was concerned about the toll of unemployment on people, families, and communities.” Such provides excellent commentary, but her track record as Federal Reserve Chairman shows she is more for the top 10% of the economy than the bottom. In reality, and what the markets already suspect, her appointment is an “arranged marriage” to the Fed.

Janet Yellen, along with every Fed Chairman since Paul Volker, has almost single-handedly destroyed the bottom 90% of the American economy.

The one lesson that we have learned since the 2008 “Great Financial Crisis” is that monetary and fiscal policy interventions do not lead to increased economic wealth levels or prosperity. These programs act as a wealth transfer system from the bottom 90% to the top 10%.

However, since she is concerned about employment, let’s start there.


During Ms. Yellen’s tenure as Fed Chairman, she focused on the “official unemployment rate” as a reason to continue accommodative monetary policies. However, despite employment falling below 5% unemployment rates, such did not lead to a surge in wage growth or economic prosperity.

The chart below shows the “real situation” concerning employment.

Yellen's Fed, #MacroView: Yellen’s “Arranged Marriage” To The Fed

Notice that post the “Financial Crisis,” the total number of employed persons fell below the previous long-term growth trend. While it is true, as shown below, that population growth has also slipped below the long-term growth trend. Such does not compensate for the massive divergence.

Yellen's Fed, #MacroView: Yellen’s “Arranged Marriage” To The Fed

Following the “Financial Crisis,” the growth trend of employment has shifted lower once again. As we will show in a moment, the New “New Normal” won’t return to the “Old New Normal” anytime soon.

Has there been “job creation” since the last recession? Absolutely.

If you look at the actual number of those “counted” as employed, that number has risen from the recessionary trough. Unfortunately, as shown, employment remains far below the long-term historical trends that would suggest healthier economic growth levels. Currently, the deviation from the long-term trends did not improve since the “Financial Crisis” and have worsened now.

More Falling Off Than Going On

However, as it relates to economic growth, the number of new entrants into the working-age population each month is often overlooked.

Yellen's Fed, #MacroView: Yellen’s “Arranged Marriage” To The Fed

As you can see in the chart above, while total employment grew by 8.5-million, the working-age population grew by 26-million, leaving a 17.7-million person deficit sitting idle in the economy. Of course, after some time, these individuals are no longer counted as part of the labor force. Such is why, despite monthly headlines of employment growth, those no longer in the labor force (NILF) continues its pace higher.

Yellen's Fed, #MacroView: Yellen’s “Arranged Marriage” To The Fed

Of course, suppose we stop counting individuals as part of the “labor force,” which is the denominator of the unemployment rate calculation. In that case, the economy will be at full-employment in no time.

Yellen's Fed, #MacroView: Yellen’s “Arranged Marriage” To The Fed