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How to get to the 6.5% unemployment rate target: roughly 270,000 jobs each month

The Federal Reserve predicts it will keep stimulative policies in place until the unemployment rate falls to 6.5%. But just how many jobs will it take to get there?

As of November, the unemployment rate was 7.7%. In order to drop to 6.5% immediately, it would require 1.9 million jobs to be created right now. Just like that. Bam!

Obviously, that’s impossible. The economy is chugging along slowly, and with job growth averaging around 150,000 each month, that’s an entire year’s worth of hiring.

But the Fed expects it will take longer than one year to get to its goal. That’s because, once you factor in population growth, the economy will need far more jobs to be added than the current pace.

To get there in a year, 3.2 million jobs have to be created. That’s roughly 270,000 jobs each month.

Extend that out to the end of 2014, and the economy would need 5 million jobs, or 200,000 jobs a month, according to David Rosenberg, chief economist and strategist for Gluskin Sheff & Associates.

But hiring at that rate is unlikely. That’s exactly why the Federal Reserve predicts it will take until some time in 2015 to bring the unemployment rate down to 6.5%.

Rosenberg thinks even that is optimistic though. If job growth continues at its current pace of 150,000 jobs a month, it could take until 2018, he said.

Choosen excerpts by Job Market Monitor from

FireShot Screen Capture #055 - 'How to get to the Federal Reserve's 6_5% unemployment rate target - Dec_ 14, 2012' - money_cnn_com_2012_12_14_news_economy_federal-reserve-unemployment

via How to get to the Federal Reserve’s 6.5% unemployment rate target – Dec. 14, 2012.

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