Looks like the US full-employment recession is spreading:
UK jobless rate falls to 5.2 percent in latest quarter
The unemployment rate in the United Kingdom in the last quarter of 2007 fell to 5.2 percent, down from 5.4 percent in the previous quarter, the government said Wednesday.
Average earnings, including bonuses, rose 3.7 percent in the fourth quarter compared with a year earlier, the Office for National Statistics said.
Yes, unemployment is a lagging indicator, but the subprime housing collapse is well over a year old. And the 4.9% rate in the US is, even by Yellen’s standards, ‘very close’ to full-employment.
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If you were BB, what would you recommend, what would you do, and what would you communicate?
If I were Fed Chairman, see my paper ‘Zero is the Natural Rate of Interest’ at http://www.mosler.org for why I would set rates at 0 bid and leave them there, eliminate reserve requirements, lower the discount rate to .25%, remove the stigma, and concentrate on bank regulation of the asset side and capital requirements in regard to public purpose.
Or if I were a mainstream economist in Bernanke’s position?
I’d have the ff rate at least at 7%, and use micro tools to address specific market functioning issues.