As I see it, Federal Reserve policy right now is reasonable only if the unemployment rate is taken as a sufficient statistic for the state of the labor market. And it seems to me the odds are 4-1 against that being true…

Matt O’Brien: Why the Fed is giving up too soon on the economy: “Two years and $1.7 trillion later…

…the Fed’s latest round of bond-buying, or QE3, is officially over. What did it get us?… The best answer is what it didn’t get us: a recession in 2013…. ‘Fiscal cliff’, ‘sequester’, and ‘debt ceiling’ might be hazy memories from a time when [the Republican House] Congress[ional Caucus] was doing its most to sabotage the recovery, so here’s a refresher…. There’s been an awful lot of austerity the last few years. Enough that the economy should have slowed down quite a bit…. But that’s not what happened…. QE… is the Fed’s way of printing its money where its mouth is when it says rates will stay low for a long time. That’s why, as economist Michael Woodford argued, QE works better when it’s used with forward guidance that makes the Fed’s promises about future policy more explicit. The question, then, is what message the Fed is sending now…