This strategy, which was attempted by the Federal Reserve under the Kennedy administration and was known as “Operation Twist,” is an attempt at stimulating the economy by making long-term borrowing cheaper at the expense of short-term borrowing. From the FOMC’s statement:

The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.

The statement also commits to keeping the federal funds rate, the rate at which banks lend to each other overnight, very close to zero, as it has since the beginning of the economic downturn. Markets are already responding with the expectation that the Fed will carry out these goals.

However, the statement was in general pessimistic about what the strategy would accomplish:

The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate… The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further.

Here, the FOMC implies that they will not be pursuing a strategy of increasing inflation or inflation expectations to motivate firms to invest now rather than later and ease the debt burdens of ordinary families, a strategy that has been endorsed by many economists including former IMF chief economist Kenneth Rogoff and the former chair of President Obama’s Council of Economic Advisers Christina Romer.

For the second time this year, the statement had three dissenting votes, which is considered an unusually high number in FOMC voting history. The dissents came from Richard Fisher, Narayana Kocherlakota and Charles Plosser, the presidents of the regional federal reserve banks in Dallas, Minneapolis and Philadelphia, respectively. The statement said the dissenters voted against the statement because they opposed additional stimulus.

Dr. Lawrence H. Summers, Director of the National Economic Council and Assistant to the President for Economic Policy, announced his plans to return to his position as University Professor at Harvard University at the end of the year.

Dr. Summers is the chief White House advisor to the President on the development and implementation of economic policy.  He also leads the President’s daily economic briefing.

“I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team.  Over the past two years,  he has helped guide us from the depths of  the worst recession since the 1930s to renewed growth.  And while we have much work ahead to repair the damage done by the recession, we are on a better path thanks in no small measure to Larry’s wise counsel.  We will miss him here at the White House, but I look forward to soliciting  his continued advice and his counsel on an informal basis, and appreciate that he has agreed to serve as a member of the President’s Economic Advisory Board.”

Dr. Summers said “I will miss working with the President and his team on the daily challenges of economic policy making.  I’m looking forward to returning to Harvard to teach and write about the economic fundamentals of job creation and stable finance as well as the integration of rising and developing countries into the global system.”

Dr. Summers overseas the coordination of economic policy making across the Administration, leads the President’s daily economic briefing and has been a frequent public spokesman for the Administration’s policies.

Under Dr. Summers’s leadership, the National Economic Council has been at the center of economic policy making in the Obama Administration.  He served as an architect of the Recovery Act and other job creation measures and the Financial Stability Program.  As co-chair of the President Auto Task Force, he led the restructuring of the U.S. automobile industry.  He has also played a leading role in managing our international economic relationships including China, developing the President’s health care plan, opening the broadband spectrum, and in international climate negotiations.

Summers is the third major economic figure to depart the White House in recent months, following Christina Romer, the head of the Council of Economic Advisers, and Peter Orszag, the head of the Office of Management and Budget. More to come…

Council of Economic Advisers: Obama formally announced that Austan Goolsbee, an economist currently on the three-person council (also an advocate of letting Chrysler fail, a skeptic of business tax cuts’ impact, and a funny guy), will become the head of the CEA. Christina Romer, the prior head, returned to the West Coast earlier this month. The president said that Goolsbee will provide “continuity” within the White House economic team, meaning no big shakeups within the administration.

In reply, Rep. John Boehner (R-Ohio) tweeted, “Instead of ‘continuity’ w/ Goolsbee, President Obama should appoint someone who has actually created jobs in the real world.”

Things are still bad: Obama said outright that Americans are “frustrated” with how the government has handled the recession, and admitted that the recovery has been “painfully slow.” Still, he praised the administration’s efforts and said they made the right choices. He said the White House has “hardly [been] Johnny-come-lately on this issue.”

“It worked,” Obama said of the stimulus. “It just hasn’t done as much as we needed.”

This stimulative proposal is definitely not a stimulus! Someone asked Obama if his recent proposal of business tax cuts is a stimulus. The word apparently polls horribly, as Obama gave a, well, awkward answer.

“There is no doubt that everything we’ve been trying to do, everything we’ve been trying to do, is designed to stimulate growth and additional jobs in the economy. That’s our entire agenda. So I have no problem with people saying the president is trying to stimulate growth and hiring. Isn’t that what I should be doing?”

Probably Warren: Obama called Elizabeth Warren — progressives’ and bookies’ favorite to head the new Consumer Financial Protection Bureau — “a dear friend.”

“She’s somebody I’ve known since I was in law school. I have been in conversations with her. She is a tremendous advocate for this idea,” he said. That said, he did not say he would name her to the post, instead saying “I’ll have an announcement soon.” It will be shocking if it is anyone other than her at this point — and the delay has some in Washington a little confused, if not really concerned.

Job growth: Jobs came up often during the 75 minutes of questions. Obama said he is focused on fostering “broad-based job growth and broad-based economic growth” to help all Americans, especially poor Americans. “I am constantly thinking about how do we create ladders for communities and individuals to climb into the middle class.” He said he wants to create a “virtuous cycle” to sweep up all workers and lift wages.

On November: Obama denied that the November midterm elections will be a referendum on the economy, though he did say the choice is between recovery with the Democrats and regressive policies with the Republicans.

Small businesses: The president again pilloried Republicans for holding up a bill of small business tax cuts and funding to gin up lending to small businesses. It has languished in the upper chamber since June. He praised by name Sen. George Voinovich (R-Ohio), retiring this year, for saying he will cross the aisle and vote for the bill, giving it the 60 votes it needs to overcome a Republican filibuster.

She notes that the Bureau of Labor Statistics improved reports for June and July, and that more than half a million people rejoined the labor force. The number of long-term unemployed also declined — though it is not clear whether they did so because they found jobs, or because they stopped looking for jobs.

Additionally, she stressed that the jobs report indicates that the economy seems to be improving slowly, rather than deteriorating. Had the unemployment rate tracked up to 9.8 percent, or had private employers shed workers rather than adding them, fears of a double-dip would not been unwarranted.

Here is the full text of her analysis:

Today’s employment report was better than expected. Private sector payrolls increased by 67,000 in August — the eighth consecutive month of private sector job growth. This growth is consistent with other recent data reports indicating that the economy is continuing to recover, albeit at a somewhat slower pace than in the early spring. The rate of job growth, however, is not as large as needed to bring the unemployment rate down quickly. Indeed, the unemployment rate rose one-tenth of a percentage point to 9.6 percent, as more than half a million people joined the labor force. The President continues to work with his economic team and with Congress to identify measures that could help speed the recovery and put the economy on a path of steadily declining unemployment.

In addition to the rise in August, the estimates of private sector job growth for June and July were revised up by a total of 66,000. Since last December, private sector employment has risen by 763,000. Despite the rise in private sector employment, overall payroll employment fell by 54,000, as 114,000 temporary Census jobs were eliminated.

Private sector payrolls expanded in a number of sectors, including education and health services, construction, and temporary help services. Manufacturing employment fell 27,000 in August; much of this drop likely reflects the fact that manufacturing employment in July was elevated because General Motors chose to forgo its usual two-week shutdown. The manufacturing ISM Report on Business released on Wednesday indicated stronger employment growth in manufacturing in August than in July. State and local government payrolls declined by 10,000 in August, consistent with continuing budget difficulties in many states and localities.

In the household survey, the number of people employed rose by 290,000. But, because the labor force rose by 550,000, the unemployment rate ticked up to 9.6 percent (from 9.5 percent in July). The employment-to-population ratio also rose one-tenth of a percentage point (to 58.5 percent), indicating that in the household survey employment growth more than kept up with population growth. In addition, the number of workers who have been unemployed 27 weeks or longer declined sharply, from 6.57 million to 6.25 million.

Against the backdrop of some unsettling economic data in the past few weeks, today’s numbers are reassuring that growth and recovery are continuing. At the same time, the fact that the growth of private sector payrolls is below the level needed to keep up with normal growth of the labor force is obviously unacceptable. There are a number of step we could take to help increase private sector job growth and put the economy on a path of steadily declining unemployment. We will be working with Congress on these measures in the coming weeks.

There will likely be bumps in the road ahead. The monthly employment and unemployment numbers are volatile and subject to substantial revision. Therefore, it is important not to read too much into any one monthly report, positive or negative. It is essential that we continue our efforts to move in the right direction and encourage robust job gains.

People in line for a job fair in Ft. Lauderdale, Fla. (Michael Francis McElroy/ZUMA Press)

This morning, the Department of Labor announced that the unemployment rate climbed from 9.5 percent in July to 9.6 percent in August, as economy-wide lack of demand kept businesses from hiring new workers. Some economists expected a worse report, and the August data offers more evidence of a stall-out in the recovery.

[Economy1] The report indicated that total employment declined by 54,000, with 121,000 jobs lost from the public sector and 67,000 jobs gained in the private sector. The federal government shed workers as the census finished up. The number of long-term unemployed — workers out of a job for more than six months — declined from 6.6 million to 6.2 million. The long-term unemployed make up 42 percent of unemployed persons, down from 44.9 percent in July.

Economists feared a worse report — with private-sector job growth beating forecasts by 20 to 50 percent. For the first time since 2007, the unemployment rate improved year-on-year. But the rising unemployment rate remains evidence of a lagging recovery. Stimulus funds are drying up. Joblessness is pervasive, meaning lower sales for companies. Business owners are concerned about economic conditions, and therefore are loath to hire new workers. Since December, 2009, the private sector has added 763,000 jobs — 95,375 a month — but to keep up with population growth, the United States needs to add about 125,000 positions per month. To return to full employment in five years, the economy needs to add 300,000 a month, every month. The United States has added just 3.4 million net new jobs since January 2000, though the country has grown by 29 million people.

In the past few months, the White House has focused on private-sector job creation as evidence of “recovery summer,” though the unemployment rate remains stubbornly high. Some economists inside and out of the administration have declared the jobs trend evidence of the need for new government stimulus to make up for a lack of private demand.

Leaving her post as the head of the White House’s Council of Economic Advisers this week, Christina Romer declared the turnaround “insufficient.” The economy “is growing, but not fast enough to create the hundreds of thousands of jobs each month needed to return employment to its pre-crisis level.”

“The only surefire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less,” Romer argued. “In my view, we should be moving forward on both fronts.”

The White House is reportedly considering new measures to help gin up new jobs in advance of the November elections. But it will likely focus on less-stimulative tax cuts, rather than more-stimulative spending measures. (The most effective forms of stimulus are food stamps and unemployment benefits, which go directly to the neediest citizens and are spent almost entirely, immediately.) Senate Republicans and Sen. Ben Nelson (D-Neb.) have indicated they will support no additional stimulus funds.

However, Republicans have said they support tax breaks, and even might not require spending offsets. Recently, Republicans such as Sens. Jon Kyl (Texas) and Mitch McConnell (R-Ky.), the minority leader, have argued that spending increases, but not tax cuts, need to be offset with spending cuts.

The administration is reportedly considering pushing for a payroll tax holiday. The tax cut would be temporary, to encourage businesses to hire quickly to take advantage. The Congressional Budget Office this winter found payroll tax holidays to be among the more effective tax cuts in creating jobs and aiding the economy. According to the CBO, a payroll tax cut is about 25 to 33 percent more stimulative than providing a refundable tax credit for lower- and middle-income households, for instance.

And the economy is in need of more aid to help restart the recovery, with the jobs report containing broad evidence of a stall out. The number of unemployed persons — workers without a job, but actively seeking a new one — increased from 14.6 million to 14.9 million. The number of workers employed part-time who want to work full time increased by more than 330,000 over the course of the month.

The sustained, high rate of joblessness is also suppressing wages for working Americans. Most of the job growth since the recession ended has come not from middle-class or well-salaried positions, but in jobs like home health aide that often come with about $9 an hour and no benefits.

“[T]he damaging effects of high unemployment are not just felt by the workers (and the families of workers) who have lost jobs,” Lawrence Mishel and Heidi Shierholz of the Economic Policy Institute wrote this week. “Workers who have kept their jobs or found new work during this downturn have also suffered from a broad-based collapse of wage growth over the last two years. And with unemployment expected to remain elevated for many years to come, we do not expect the suppression of wage growth to ease anytime soon.”

Romer notes that she believes the country is not where it needs to be, and that more tax relief and stimulus would help businesses and families:

[C]ompared with the problems we face, the turnaround has been insufficient. Though the unemployment rate has come down six-tenths of a percentage point, it is still 9.5 percent — an unacceptable level by any metric. Real GDP is growing, but not fast enough to create the hundreds of thousands of jobs each month needed to return employment to its pre-crisis level.

And she regrets not doing more:

The thing I do regret is that there is still so much unfinished business. I would give anything if unemployment really were down to 8 percent or lower. The American people are suffering terribly. Policymakers need to find the will to take the steps needed to finish the job and return the American economy to full health, and no one should be blocking essential actions for partisan reasons. …

In the long run, the transition to a higher-saving, higher-investment, higher-export economy can restore demand, and hence output and employment to normal. But at the moment, as the recent data emphasize, that process is operating painfully slowly.

The pressing question, then, is what can be done to increase demand and bring unemployment down more quickly. Failing to do so would cause millions of workers to suffer unnecessarily. It also runs the risk of making high unemployment permanent as workers’ skills deteriorate with lack of use and their labor force attachment weakens as hope of another job fades.

She notes that the solutions are not easy, but they do exist:

While we would all love to find the inexpensive magic bullet to our economic troubles, the truth is, it almost surely doesn’t exist. The only surefire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less. In my view, we should be moving forward on both fronts. …

Given our long-run fiscal challenges, any additional support should be done in a responsible way. It makes sense to view some temporary support as emergency measures. Most actions, however, should be paid for over time with future spending cuts or appropriate future revenues. But concern about the deficit cannot be an excuse for leaving unemployed workers to suffer. We have tools that would bring unemployment down without worsening our long-run fiscal outlook, if we can only find the will and the wisdom to use them. …

I desperately hope that policymakers on both sides of the aisle will find a way to finish the job of economic recovery. We have already navigated through miles of difficult, uncharted waters. Surely we can go the rest of the way. The American people deserve nothing less.

And it includes some, well, very sweet passages:

On election night almost two years ago, my husband and I did a most uncharacteristic thing. We’d had friends over to watch the returns and had celebrated the Obama victory with a sedate glass of champagne around 8:00 California time. By 8:30 our friends had gone home and we were left wondering what to do with our joy. I finally declared that I needed to be part of a crowd.

So, we hopped in the car and followed the sounds of honking horns into downtown Oakland. We stopped at the first street corner where people were gathering. There we were, two middle-aged economists, dancing in the street with the Oakland teenagers. Like so many that evening, we were celebrating the promise of a new President who shared our values and our dreams for a better America. What we didn’t realize that November evening was just how large an economic nightmare lay before the new President and the American people. It would require actions few would have contemplated that evening just to keep the unemployment rate from rising beyond low double digits. It has been an honor beyond any I could have imagined to be part of the team.

“Given our long-run fiscal challenges, any additional support should be done in a responsible way,” she will say, according to short excerpts released. “But concern about the deficit cannot be an excuse for leaving unemployed workers to suffer.

“We have tools that would bring unemployment down without worsening our long-run fiscal outlook, if we can only find the will and the wisdom to use them.”

Today’s employment report shows continued signs of gradual labor market recovery. Private nonfarm payroll employment increased by 83,000 in June and the unemployment rate fell two-tenths of a percentage point to 9.5 percent. June marks the sixth month in a row that private sector employment has increased. These continued signs of healing are important, particularly given the recent volatility in world markets and the mixed behavior of other recent economic indicators.

And President Obama echoed her statement:

[The June employment report] reflected the planned phase out of 225,000 temporary Census jobs. But it also showed the sixth straight month of job growth in the private sector. All told, our economy has created nearly 600,000 private sector jobs this year. That’s a stark turnaround from the first six months of last year, when we lost 3.7 million jobs at the height of the recession. Now, make no mistake: We are headed in the right direction. But as I was reminded on a trip to Racine, Wisconsin, earlier this week, we’re not headed there fast enough for a lot of Americans.

These statements are accurate, but frankly far too rosy. And they seem to add evidence to the theory that the White House is done pushing for stimulus or big jobs bills, despite the tremendous number of unemployed, underemployed and discouraged workers. Contrast those statements with this from Sen. Harry Reid (D-Nev.), the majority leader, who hails from the state with the worst unemployment rate in the country:

The fact that the private sector created jobs for the sixth straight month may be a positive trend to economists, but it’s no comfort to the millions of hard-working Americans and Nevadans who want work but can’t find a job in this tough economy. Our economy is still far behind where it needs to be. That is why we’ve been working to cut taxes for small businesses, and close tax loopholes for CEOs who ship American jobs overseas.

I hope these numbers will be a wake-up call to many of our Republican colleagues.  At a time when we should be working together to create jobs, those looking simply for political gain are content with denying help to those in need. As we move forward, I hope we can find common ground on common-sense solutions that make it easier for businesses to create jobs and get our economy moving again.  We work for the taxpayers, and creating jobs is job number one.

Or this, from House Minority Leader John Boehner (Ohio):

This jobs report is a disappointment for every family and every small business who heard President Obama declare just weeks ago that our economy is “getting stronger by the day.” The writing is on the wall for President Obama’s “stimulus” policies and everyone — taxpayers, economists, and the rest of the world — sees it but him. How much longer are we going to continue with this disastrous spending spree that is scaring the hell out of the American people and piling debt on our kids and grandkids? Instead of whining and making excuses, President Obama should stop turning his back on small businesses, start listening to the American people, and work with Republicans to put people back to work.

I’ll disagree with Boehner about the cause of the economic hurt — and will go out on a limb to say it’s caused by recession-fueled joblessness rather than profligate “stimulus” spending. But I don’t disagree with the point that the jobs report is a disappointment.

Politicians might try to spin this. This morning Christina Romer, the head of the administration’s Council of Economic Advisers, wrote on the White House blog that today’s report “shows continued signs of labor market recovery.” She posted this chart, where the trends do look good. But if you take that right-most blue bar — which shows job growth — and take out the temporary census jobs, it’s barely existent. And once the census is over, those jobs are gone.

Washington has not run out of options to tackle the unemployment crisis. The government could expand, directly hiring workers. (As the census demonstrates, when the government hires workers, unemployment goes down.) It could push tax incentives and stimulus, so that Americans spend more and companies decide to hire more workers. It could take up Rep. George Miller’s (D-Calif.) Local Jobs for America Act, providing $75 billion to local governments to keep employees on the payroll. Or it could have considered Sen. Tom Harkin’s (D-Iowa) proposal to grant $23 billion to keep public school teachers in their classrooms, the Keep Our Educators Working Act. Both of those bills would have preserved or created local government jobs, and a spate of other congressional initiatives are aimed at private-sector hiring.

But the issue at this point is not ideas, but will. Congress has simply lost its appetite for expensive job-saving or job-creating programs given the deficit. That does not mean the economy won’t recover. It will. But it means that unemployment will continue to lag behind the recovery, sustaining severe hardship for families and individuals.

That part we knew. Job creation has been the lagging indicator in recessions stretching back two decades, and, as the Labor Department reported recently, the economy has shed 8.4 million jobs since this recession began 25 months ago.

“This is an enormous hole we’re in,” Chad Stone, senior economist at the Center on Budget and Policy Priorities, said recently.

But the White House also offers this warning about the likely consequences of the long-term unemployment problem — an assessment rare in Washington for its brutal honesty.

Many workers will have difficulty finding work for some time to come. Extended periods of high unemployment and low job creation rates mean that many displaced workers will exhaust their unemployment insurance benefits before jobs become available in large numbers. After months or even years of unemployment, most who exhaust their benefits will likely have used up whatever savings they had when they lost their jobs. Many will be forced to turn to public assistance—temporary Assistance for Needy Families, Supplemental Nutritional Assistance (formerly known as food stamps), or other similar programs—to make ends meet.

The message is clear: For millions of Americans, this thing will get worse before it gets better. And there’s only so much that Washington can do.