Although employment is one of the Fed’s central missions and the current chair, Janet Yellen has a passionate commitment to employment for all willing workers, the shape that unemployment takes in much of the developed world can not be altered by monetary policy although it can perhaps be changed by tax policy.  Writing from Jackson Hole, Daniel Altman looks at some tacts that might help.

The private sector in the United States has been consolidating rather than expanding in the past few decades. The average payroll at an American company is about 50 percent higher now than in 1977, as I have written. In other words, there have been progressively fewer businesses per worker, and those business have gotten much bigger. This hinders innovation too, since bigger organizations tend to have more vertical hierarchies. The more layers in the organization, the tougher it is for new ideas to percolate to the top.

In this environment, low interest rates may not be enough to boost employment. Some firms could find it easier to replace and renew old capital, and new firms may find the cost of raising money more bearable. But stricter lending policies among banks have dulled this effect, stifling the growth of small businesses. Overall, however, the case for hiring in the United States — or, indeed, for any major expansion of their production here — is clearly a difficult one to make for many American companies.   The US Fed is Not Going to Solve the Employment Problem