It is a slow day for economics itself, so I figured I would formalize and tighten up some points I have been raising about the low importance of direct measures of labor market scarring. That way I can put the report up to the blog and refer to it over time as this issue plays out, which it will.
My research into this area is now a finely tempered steel sword, and incisive even by my own very high standards! But it does not really move the dial. Rather, it is background.
While the most prominent direct measures of economic scarring so far are pretty much irrelevant, the issue of scarring is itself serious. As Greenspan might say, the map is not the territory.
A desire to avoid scarring is one of many reasons that the Fed has become almost max dovish here. As an aside, it may be worth reiterating that Fed watchers obsessing over when the Fed will upsize QE are playing a greater fool game that risks leaving them the fool. Not that this is easy by any means, but we should maybe pick our battles. We are not waiting for news from the Fed. We got it in September.