Ben Bernanke and the Fed have great belief in academic models whether they make any real world practical sense or not.

Indeed, Bernanke's reliance on formulas instead of common sense is what told him there was no housing bubble, that unemployment would not get above 8.5%, and that Quantitative Easing in massive force would cause the unemployment rate to drop. He was wrong on all counts.

Nonetheless Bernanke is sticking to his models. With a hat tip to Zero Hedge, here is yet another article from the Fed (not Bernanke), that places great reliance on academic formulas. The article concludes structural unemployment is "likely to be transitory rather than permanent".

For Academic Wonks Only

Academic wonks may wish to consider the San Francisco Fed article Is Structural Unemployment on the Rise?
Labor demand has been growing in the United States, reflected in a modest increase in private payroll employment this year and a more substantial increase in private-sector job vacancies over the past 12 months. Despite these signs of improvement, the unemployment rate has declined only slightly. Some analysts have raised the specter of a fundamental mismatch between the supply of labor in terms of workers’ skills and demand for labor in terms of employers’ skill requirements. Such a mismatch between available workers and available jobs could increase the level of structural unemployment. To the extent that structural unemployment is actually rising, the phenomenon poses a dilemma for policymakers. It cannot be ameliorated through conventional monetary and fiscal policy. And it implies an increase in the lowest unemployment rate associated with stable inflation, often identified by the acronym NAIRU, which stands for the non-accelerating inflation rate of unemployment.

The Beveridge curve and mismatch

http://globaleconomicanalysis.blogsp...mulas-fed.html