The Fed has a dual mandate of price stability and full employment. They are failing miserably at both, although I really don't think it makes any sense that a central bank is responsible for employment. A country's fiscal policies, tax laws, educational system, incentives, and the like are the backbone for job creation - not where the Fed's interest rates are. But I digress.
If you listen to the propaganda from the Fed they believe they have created 3M jobs. [Jan 11, 2011: Federal Reserve's Yellen: Q1 + Q2 to Create 3M Jobs] They also believe (or at least say in public) QE has nothing to do with the price increases in commodities; even though the stated intention was an increase in asset prices. (i.e. manipulation of asset prices higher than what they would otherwise be) Only in their convenient world does QE increase asset prices in the stock market BUT NOT commodities. Living in ivory towers is an awesome experience.
Now while the unemployment rate has dropped the past few months (sharply in fact) much of this is due to the fact the labor force participation rate has dropped. We've lost a few million Americans, who have simply gone missing. It appears about 1M of them have enrolled into disability the past 2 years - which is helping the unemployment rate, but has nothing to do with job creation. So the unemployment rate falling has been happening mostly for the wrong reasons... sorry Ms. Yellen.
I cannot find the original post but back in the fall of 2010, as I thought how this would work out, I opined it would very plausible than as QE plays out, it could actually hurt the job market rather than help it. In this piece from October 2010 I wrote:
Again this February:
Again in March:
Ironically the more QE to come, the more speculators will drive up commodities.... which will impair corporations (who might cut jobs to preserve profit margins) and consumers... which (in the Fed's mind) will require more QE. Circular logic anyone? But in The Bernank's view his actions only make the stock market go up and not other assets (read: commodities) so he won't make the connection.
I keep using the word irony because this band of economists seems to be lost. While they chant for higher inflation as official policy goal, they are simply imposing a tax on countless people who cannot afford these pricing pressures. The reality is they are aiming for a misguided wealth effect mantra that helps the top 10% (and especially top 1%) but is simply a corrupted offshoot of trickle down economics (clearly a massive failure for anyone in the bottom 2/3rds of this country the past 2 decades).
This tax they are creating, has the potential to cause corporations to pull back on hiring, which is the exact opposite of their mandate. Why they don't see this is beyond me.
In my opinion the best thing the Fed could do is state to the world there is zero chance of QE3. The dollar would rally, commodities would be crushed, and Main Street would benefit. But that might hurt Wall Street and since the country is run for the select few, I expect Fed policy to continue down the same road.