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The Jobs Growth vs. Fed Growth Chart That Should Put Everything Into Perspective


We’ll make this pretty simple: the difference between jobs growth and the growth of the Federal Reserve’s balance sheet in the last five years is pretty shocking.

Here's a chart to illustrate the difference:

H/T: @Not_Jim_Cramer

Let’s break this down. First, let’s look at jobs.

Private sector jobs in January 2008 numbered at around 115.7 million, an all-time high. Then there was the crash and the Great Recession and the U.S. hemorrhaged approximately nine million private sector jobs.

Since then, seven million workers have been put back on private payrolls (not too shabby).

Here's a chart to help you visualize it:

St. Louis Fed Reserve.

Now let’s take a look at what the Federal Reserve has been doing.

Currently, the Fed’s balance sheet stands at around $3.1 trillion. That’s nearly 20 percent of U.S. gross domestic product (the total value of goods and services adjusted for inflation). Before 2008, the Fed’s balance sheet was roughly six percent the size of U.S. GDP.

Simply put, the Fed’s balance sheet has exploded in the past five years and the Fed has zero intention of dialing down its easy money polices (it announced Wednesday that it will continue along with its $85 billion-a-month bond-purchasing program. That’s roughly $1 trillion per-year spent on bonds).

Here's another chart to help you visualize the balance sheet growth:

Federal Reserve.

Federal Reserve Chairman Ben Bernanke said Wednesday the Fed probably won’t taper until unemployment hits 6.5 percent.

But here’s something to think about: with the unemployment rate currently hovering at around 7.4 percent, Morgan Stanley said it will take the Fed about five to six years at a pace of 150,000 new jobs created per month to achieve its target rate.

“In dollar terms,” Seeking Alpha explains, “the Fed balance sheet will have grown from $3 trillion to $9 trillion, about 50% of annual estimated U.S. GDP in 2019, assuming a minimally satisfactory 2.5% annual GDP growth rate over the next 6 years, though we note that the current rate of GDP growth is in the 2.0% range.”


Follow Becket Adams (@BecketAdams) on Twitter

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