07/05/2013 12:02 pm ET Updated Dec 06, 2017

QE3 Works, So Please Don't Mess With It!

Dear Federal Reserve Governors; Please don't mess with QE3 just yet! Not in September, or even December. There are still too many reasons not to begin to taper the $85 billion per month in purchases that have kept interest rates so low, though rates are already rising rapidly. You are doing your job in raising expectations for higher growth and higher inflation.

You are also doing your job in encouraging more workers to look for work with 177,000 more entering the workforce. But part time jobs have jumped 322,000 to 8.2 million employed, more than the 177,000 additional entering the workforce, so more fulltime workers may have become part timers.

You are doing your job in putting 1.1 million older workers back to work of the 1.6 million jobs created over the past year, but there were only 355,000 jobs added in the 25 to 55 year age group, who are our prime workers, says WSJ Marketwatch's Rex Nutting.

Your QE3 program is also doing its job in boosting wages. The June report reported that hourly and weekly wages increased 0.4 percent in June, and hourly wages are now up 2.2 percent over the last year. But that means employers are working their employees harder with longer hours, rather than hiring many new workers.


Graph: Calculated Risk

This well-known graph shows it best. It reveals just how far the U.S. is from returning to normal employment, and how long this recovery has taken. The longest post WWII recession until the Great Recession lasted some 22 months under GW Bush.

But employment from the Great Recession is still -1.6 percent below peak employment 40 months later! This has to be an intolerable situation, and the reason the Fed began its $85 billion per month drive to keep interest rates so low last September.

And then there's the Labor Department's U-6 total of unemployed that jumped from 13.8 percent to 14.2 percent in June. It is defined as "all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force."

This is not the America we should want to live in, so please Fed Governors and Chairman Bernanke, above all. Stick to your monetary guns! QE3 works, but the economy isn't yet working well enough to put down those guns.

Harlan Green © 2013