I am not an economist but from a practical perspective, I believe the current extremely low interest rate environment is actually causing higher unemployment, directly in contrast to the Fed’s mandate.
What ? How? Are you nuts?
In my conversations with Baby Boomers I have noted a reluctance to retire. Many of the boomers were slammed hard by the housing bubble and the subsequent dramatic fall in the stock market. Their confidence has been shaken and they do not view their home as a savings buffer. In addition, while many have seen their fortunes in the stock market improve, they are now wary of the ability of their savings, pensions and 401K plans to support their retirement plans. Their solution: stay in the job market and save more toward retirement.
For those who have opted to retire from their long term careers, the poor returns available on “secure” investments like T-Bills, has caused them to consider moving back into the labor market. In addition, the low returns are also causing a more conservative approach to spending by this population. Spending which in “normal” times would have stimulated the economy.
In short, it is my belief that the Fed’s policy on holding down interest rates for a prolonged period is keeping people from retiring or fully retiring. This causes them to be counted as part of the employable population and consumes jobs that historically might have been freed up to employ younger workers.
Allowing interest rates to rise might actually stimulate the employment picture and give our older work force comfort in retiring. Fewer workers competing for jobs would certainly help younger families and graduating students secure employment
I base my opinion on observation not empirical studies or scientific evidence. Please talk with your circle of acquaintances and explore whether this supposition holds water.