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Words of clarity before the unemployment uncertainty

It was a moment of economic clarity and honesty. A regional Federal Reserve Bank president said out loud what confuses many people. James Bullard, the president of the Federal Reserve Bank of St. Louis, told Bloomberg Wednesday, “The central bank cannot drive the [economic] growth process.”

Of course, he’s right. But that doesn’t stop a lot of investors and politicians from assigning credit and blame to the central bank for what’s happening, or not happening, in the American economy. The Fed helps drive interest rates, but isn’t solely responsible for the costs of borrowing. And borrowing costs don’t impact economic growth, such as hiring, by themselves.

In his interview, Bullard elaborated, “The growth rate is driven by long run factors in technology and human capital and what the U.S. needs is a better medium term growth strategy and you need everyone to get on board with that growth strategy. That’s what you need. The central bank cannot do that.”

Bullard’s candor comes as investors ready themselves for the monthly employment data on Friday. Full employment for a dynamic economy like America’s is traditionally thought to be 5 percent. If that’s the case, the U.S. has been running at capacity since January. That probably will hold true when the March data is released in the new week.

However, it’s clear to many Americans that they are not fully employed and it goes beyond the Bureau of Labor Statistics’ definition of who is counted as employed. Retiring baby boomers, discouraged workers, people only able to find part-time work and permalancers (permanently working freelancers) are moving the economy beyond traditional measurements.

What’s the relation between Bullard’s directness and the muddy monthly jobs data? The ambiguity of a single data point generates perceived certainty for investors while the acknowledgement of reality breeds doubt.

Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.

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