Why have we been getting so many mixed and unclear messages from the Fed?
Federal Reserve Bank of St. Louis research economist Michael W. McCracken has a new article up examining this very question, and he comes to the conclusion that regional economic differences play an important role in dividing up the Fed.
When the various Fed regions are all behaving similarly, Fed governors tend to be in agreement. And vice versa.
And right now there’s wide dispersion, as this chart regarding unemployment across the regions shows:
Of course, there’s a few caveats. First of all, this is only 20 years of data, so it’s not that much to go on.
Second, there are only two recessions that really caused deep unemployment here (the impact from the tech bubble was fairly muted in the real economy). It may be the Fed division and sharp regional economic variation are both correlated with recessions, and not correlated with each other. Or to put it another way, sharp downturns naturally produce differing visions for what to do, as well as produce regional differences.