Last month the WSJ proudly headlined: Job growth continues to improve.

This month it took a downer: Job Growth Loses Steam

What will next month´s headline reflect? Maybe the nutty will have their day. Something along the lines of this analyst´s comment:

Assessing the job gains over time takes on added importance because the Fed “is reaching the point where it will need to decide just how ‘full’ full employment really is,” wrote Steven Blitz, chief economist of ITG Investment Research, in a research report this week. In other words, Mr. Blitz said, even 200,000 new jobs a month is less than what should be expected two years into a recovery. If the jobs numbers keep coming in at the levels seen in the past few months, he said, the Fed might have to consider raising interest rates. “It is recognizing that the economy has downshifted to a different level of growth in terms of full employment, and normalizing policy sooner than they would have thought was necessary.”

And we didn´t even get the 200,000 new jobs!

But someone is explicitly saying what has been implicitly implied by many. That the much lower level – not of growth but of output, consumption, sales, employment, etc. etc. – is the new normal and that we should passively accept that. St. Louis Fed president Bullard appears to agree when he says the economy is quite close to “potential”. Why? Because inflation has been going up!

But really, despite changing headlines, the labor market situation has been “stably depressive” for many months. An update on some charts is revealing. Pay close attention and observe that the “tragedy” has a pretty specific start date. It´s not when house prices peak in early 2006. It´s not when the financial crisis began in early 2007 (and when house prices really “shot down”), or even its official start date in early August 2007. Through all that time and extending to mid-2008 things were “normal”. The recession that started in December 2007 was not deemed special.

The “turning point” is set in mid-2008. The defining characteristic of that moment, which sets it apart from all the history of the last 74 years is that the Fed yes, the Fed, allowed nominal spending (NGDP) to plunge. The main reason being that FOMC members were terribly worried about the inflationary impact of oil and commodity prices.

For the past 12 years great minds have banded together in conferences and written dozens of papers on “The conduct of monetary policy in a low inflation environment”. Seems it was a waste of time, money and intellectual effort. And now, in an extremely low inflation environment the Fed has made IT the official policy. To them “better late than never” seems to be the operating rule! Never mind the real economy.