One of the worst ills of monetary central planning is that it has given rise to a laughable auxiliary of Wall Street economists who pontificate upon the entrails of the Fed’s Dot Plots. Typical of these is Neil Dutta, head of economics at Renaissance Macro Research, who had this scintillating insight for today’s Fed meeting pronouncements:
“The dots are likely to shift around, but we are skeptical that we will see four hikes penciled in for 2018. In order for this to happen, it would require four officials moving up to four hikes and for the new Richmond Fed President to also estimate four hikes this year,” Dutta said.
“Instead, what we are likely to see is a coalescing around three hikes this year. After all, there are six officials currently below three hikes for 2018,” he said.
“While some at the Fed appear to be enamored with the idea that the labor market is beyond full employment, the latest figures don’t really support this view,” he said.
“The continued rise in prime-age participation rates suggest that more workers can be drawn into the labor force provided the recovery continues,” Dutta said.
In other words, 105 months after the Great Recession ended, Dutta has read the Dot Plot entrails and finds a reason for even further prolongation of negative real interest rates.
That’s because according to this Keynesian devotee of bathtub economics, the labor pool has not yet been fully drained. So why not indulge the Wall Street carry trade gamblers with still another round of essentially free funding?
Stated differently, in the eyes of Dutta and most Wall Street economists, money has no market price and labor force utilization can be measured to the second decimal point.
In fact, both propositions give the concept of pointy-headed intellectuals a bad name. Apparently, the only reason to even have an interest rate is to ward off consumer price inflation. Yet until the bathtub of potential labor supply is drained to the very bottom there is purportedly nothing to worry about.
Never mind, of course, that in today’s globalized labor market, and under domestic arrangements where the marginal supply of labor is measured in gigs, hours and even 15-minute intervals on Wal-Mart’s schedule boards, Dutta and his Fed counter-parts have no clue about how much “slack” actually exists; nor will they ever find out.
Indeed, the only thing that can really be said is that the potential US labor force of working-age adults (16-68 years) amounts to 420 billion annual hours ( 2,000 standard hours per year for 210 million persons), and that a vast share of those hours are not currently deployed in the measured GDP.