Threatening to raise interest rates since taking over Feb. 3, 2014, 68-year-old Federal Reserve Board Chairman Janet Yellen faces stiff headwinds, despite the drop in the nation’s unemployment rate to 5.3%. Considered full employment and a harbinger of future inflation, the Fed’s data show otherwise, with the nation’s second quarter Gross Domestic Product stuck at 1.5%. Never before in post WWII recessions and recoveries has the fed seen such sluggish GDP growth with the unemployment rate falling to record lows. Yellen hoped, but the data didn’t support it, that inflation would warrant a rate hike because of increase consumer spending due to record low employment. When the Great Recession hit the economy in 2008, the nation lost some 8 million jobs, plunging the economy into what former Federal Reserve Board Chairman Alan Greenspan called one of the nation’s once-in-a-hundred-years financial panics.

Greenspan estimated it would take at least 10 years for the economy to fully recover. Seven years later, U.S. GDP remains stuck in neutral, despite the Fed’s historic low interest rates and billions of dollars spent on “quantitative easing.” Ending the third round of quantitative [QE3] Oct. 29, 2014, Yellen took a wait-and-see approach when it came hiking rates. With the European Union still reeling from the latest Greek bailout and with China’s stock market melting down and growth slowing, International Monetary Fund Director Christine Lagarde asked Yellen to hold off on any rate increase in 2016. “The pace of growth remains extremely weak by past recovery standards, but with potential for growth weaker as well it appears to be more than sufficient to keep the unemployment rate coming down,” said Jim O’Sullivan, chief economists of Valhalla, NewYork-based High Frequency Economics

O’Sullivan’s concerns echo other economists that today’s employment offers too many part-time work and too low salaries to drive the consumer economy. Responsible for some two-thirds of U.S. GDP, consumer spending has been stuck in molasses. Recent Fed data shows a buildup in factory inventories, hinting at a slowdown in the manufacturing sector. When the July’s jobs report comes out next Friday, economists expect some 225,000 non-farm payroll private sector jobs, not enough to boost GDP. When the Republican-controlled Congress passed the budget sequester bill Dec. 20, 2012, forcing across-the-board cuts to the federal budget, it took 10 months before the government shutdown the Oct. 1-16. Since Obama took office Jan. 20, 2009, it’s been next to impossible to get the GOP-dominated Congress to spend money on vital federal jobs programs.

If there’s been one confounding factor leading to stagnant GDP growth, it remains the lack federal jobs. With the EU’s economic woes, the U.S. dollar continues to rise, nearing parity with the euro, discouraging the EU from buying U.S.-made goods. Given the EU’s ongoing economic woes, it’s doubtful the dollar will retreat in value anytime soon. If inventories continue to pile up, factories will eventually start to retrench jobs, bumping up the unemployment rate. Because there’s no consensus on Capitol Hill between Democrats and Republicans how to jumpstart the economy, it’s doubtful Congress will pass a federal jobs bill. Before the 2012 sequester, forcing the federal government to spend less money, it’s been virtually impossible to add federal jobs. Nobel Prize-winning New York University Stern School economist Joseph Stiglitz warned Congress about not adding federal jobs.

When you consider how the post WWII nation climbed out the Great Depression to boom in the 1950s, it was largely due to federal work projects. Creating more federal jobs with a living wage and good benefits helped grow the nation’s GDP in the ‘50s and ‘60s, leading to strong stock market and U.S. dollar. Yellen’s having second thoughts about raising the federal funds rate because of deflationary pressures, due to the slowdown in China and Europe. “Keep an eye on the payroll growth numbers too, for a possible edging up, after the slippage seen in June,” said economist Victoria Clarke at London-based Investec. With commodity prices still weak, Clarke sees sluggish growth ahead both in the EU and U.S. Bank of England’s Monetary Policy Committee anticipates no rate hikes until 2016 or later, something weighing on Yellen when the Fed’s Open Market Committee meets Sept. 16.

Baffling Fed Chairman Yellen and her Open Market Committee, U.S. GDP continues to flat-line, despite the historic 5.3% unemployment rate. Unable to see enough growth in the consumer economy, the Fed’s at its wit’s ends trying to figure out how to jumpstart the economy. Since Yellen took the reigns from former Fed Chairman Ben S. Bernanke Feb. 3, 2014, she’s wanted to raise the federal funds rate currently at zero-to-a-quarter percent. Bernanke dropped the FFR to zero Dec. 16, 2008, after major U.S. banks ran out of cash and iconic Wall Street investment houses like Lehman Brothers went broke. If record low unemployment can’t jumpstart U.S. GDP, Yellen needs to make recommendations to Congress, including adding more federal jobs. With the 2016 presidential race in full swing, voters will look carefully at Democrat and Republican ideas.