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NOW THAT THE HEALTH-CARE REFORM DRAMA at long last appears to be nearing its denouement, Congress can turn its attention to other matters that, arguably, are more pressing. Top on that to-do list is unemployment.
The Senate Wednesday gave final passage to the first in what's apt to be a series of jobs bill, a $17.6 billion measure by 68-29 margin. The bill likely will be signed into law Thursday by President Obama. Key provisions of the bill include tax breaks for employers who hire the long-term unemployed.
The Senate last week also passed and sent to the House of Representatives a $140 billion measure with tax breaks and jobless aid, but House leaders have said they intend to seek changes in the bill. The House, meanwhile, last December passed a different $154 billion jobs bill, but the Senate hasn't acted on it. Once the health-care debate finally ends, both houses can turn their full attention to the clear and pressing problem of unemployment.
And it is a problem that isn't going away anytime soon, according the Obama administration's lead economic officials. Unemployment is likely to "remain elevated for an extended period," said Treasury Secretary Timothy Geithner, budget director Peter Orszag and Council of Economic Advisers chairman Christine Romer in a joint statement.
If the administration economics honchos' wording of their expectations for the labor market sounds familiar, it should. "Extended period" also just happens to be the Federal Reserve's favored phrasing for its expectations for monetary policy.
After Tuesday's meeting of the Federal Open Market Committee, the policy-setting panel reiterated it "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."
An "extended period" would mean maintaining the current near-zero (0-0.25%) fed-funds another six-to-nine months, some Fed officials have implied. And 0.5%, which likely would be the first stop in the rate-hike process, or even 1% would qualify as "exceptionally low" by most standards.
On Wednesday, research reports from the nation's leading banks, JP Morgan Chase and Goldman Sachs left some readers with the inference that the "extended period" of ultra-low fed-funds rates could be more extended than the conventional wisdom holds.
In a reported titled "Recession damage to the U.S. labor market: the tracks of our tears," JP Morgan economist Robert Mellman contends the signal aspect of this downturn has been the severity of job losses. The 6.1% drop in payrolls has been more than twice the decline of any recession in the past 60 years. And while the pain is widespread, it has hit lower-skilled workers and those in goods-producing industries the hardest.
Meantime, Goldman economist Sven Jari Stehn asserts in the bank's daily economic comment that the FOMC's inflation forecast appears too high given the large amount of slack in the economy -- and in the labor market in particular. Given the potential for a further, substantial decline in "core" inflation to 1%, "there is significant room for downside inflation surprises to keep the [FOMC] on hold for a long time to come," he writes.
The appearance of these research notes from the powerful and well-connected JP Morgan and Goldman just a day after the FOMC meeting had some traders' tongues wagging. Then again, they're suspicious types by nature, who believe nothing happens by coincidence.
Of course, perhaps nothing should be inferred from Tim Geithner & Co. saying unemployment will remain high for "an extended period" on the same day that Ben Bernanke & Co. say they expect to keep rates extremely low for "an extended period." Or that two top banks provide supporting evidence rates the following day about the parlous state of the labor market and for maintaining ultra-low rates.
In this space Wednesday ("Not the Best of All Worlds for the Fed," March 17 ), it was pointed out that, if the recovery was as rip-roaring as the bulls who have bid up stocks would assert, why is the fed-funds rate still near zero? These latest reports suggest the Fed could remain on hold for some time, which implies the apparent contradiction between near-zero rates and a seemingly robust recovery in the economy and risk assets would have to be resolved, and not necessarily according to the bulls' viewpoint.
Comments: randall.forsyth@barrons.com
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