Fisher speech important

The speech by Fed Vice Chairman Stan Fisher is important because it discusses the uncertainty that we face in the current macro-economy and the difficulty with running any monetary policy. First, it admits the current economy is weak in spite of six months of above 200,000 in new jobs. The forecasts have not done a good job and there have been downward revisions. Second, the speech focuses on the  uncertainty associated with permanent and temporary labor issues. We are having a hard time untangling this mess of information.Third, it also admits the difficulty with disentangling supply and demand factors in labor and the current issues of cyclical and permanent changes in labor markets. Demographics and other issues may preclude many from ever going back to work. We do not know the true level of slack in the economy.

Some may say that this means the Fed should error on the side caution and hold off any rise in rates. That just means it will be harder for the Fed to determine the right action at the right time.