Federal Reserve Chairman Ben Bernanke’s latest lecture, this one on the state of the labor market, seems to have inspired markets to shake off whatever was ailing them last week, the gold price surging nearly $20 an ounce on word that Bernanke’s money printing trigger finger is getting a little itchy.
This was apparently the portion of the speech that got traders excited:
Notably, an examination of recent deviations from Okun’s law suggests that the recent decline in the unemployment rate may reflect a reversal of the unusually large layoffs that occurred during late 2008 and over 2009. To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.
I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession. If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well.
A total of three mentions of “accommodative policies” has dramatically improved the mood of traders.
