I’ve been thinking over the old Greek myth about Charybdis (a monster who created a whirlpool) and Scylla (a large, dangerous rock, both of whom sat opposite one another in a narrow strait on the Aegean sea) in thinking about the employment situation lately. As the old story goes, to avoid one of these hazards was to crash straight into the other. Our modern-day equivalent is that we really do need unemployment to keep dipping lower to provide opportunities for economic growth and improvement, but at the same time Mr. Bernanke has announced that the Fed will reduced its buying of mortgage and treasury securities (currently running at $85B per month) as and when unemployment starts to dip. And when the magic unemployment number gets to 6.5 percent, the quantitative easing will cease.
Thus our current Scylla is the unemployment rate, which continues to move downward at a snail’s pace, while Charybdis is the promised (or threatened) end to economic stimulus from the Fed. If we don’t continue to see improvements in unemployment, we’re stuck in a stagnant economy. But as quantitative easing is itself eased off, the markets will suffer from a lack of the liquidity that has kept them humming along for the past few years despite only slow and fitful improvement to the underlying economic fundamentals.
Is there a shipwreck of some kind in our future? Navigating between the two monsters is notoriously difficult, but it has been done before. Hopefully, between the Fed and fiscal policy on the one side, and overall global economic improvement on the other side, the powers that be can steer a course between Scylla and Charybdis that will see us make it through that hazardous channel. Cross your fingers!
Oh, and about those numbers: overall jobs grew in June by 195,000, with information largely unchanged, and boosts in professional and business services (plus growth in health care) showing a slight upward trend across those areas for IT workers. Find the June report in its usual online location for more details.