Fed’s Yellen Optimistic on US Labor Market But Support Still Needed

Federal Reserve Chair Janet Yellen on Tuesday said the U.S. labor market is healing but still needs support from the nation’s central bank.

In prepared testimony for a hearing before the Senate Banking Committee, Yellen noted that hiring has picked up compared to last year, averaging 230,000 net new jobs per month this year. The unemployment rate has dropped from 7.5 percent to 6.1 percent over the past year — faster than the Fed expected.

But perhaps most importantly, Yellen acknowledged that broader measures of labor market health have registered “notable improvements.” She has frequently argued that the traditional measure of unemployment does not capture the true strain in the job market. Many workers may be in part-time jobs when they would rather have full-time positions, or they may have given up looking for work because they are discouraged by their prospects.

The broadest measure of labor market distress shows 12.1 percent of the labor force is unemployed, underemployed or discouraged — down about 2 percentage points from a year ago. Though the numbers are moving in the right direction, Yellen said Tuesday they remain too high. Some economists believe that is why wage growth has remained weak despite stronger hiring.

“These and other indications that significant slack remains in labor markets are corroborated by the continued slow pace of growth in most measures of hourly compensation,” Yellen said in her prepared remarks.

via Washington Post

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza