New Fed chair’s ‘dashboard’ of job-market gauges

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WASHINGTON (AP) — The Federal Reserve on Wednesday
downplayed the unemployment rate as a guide to the U.S. economy’s
health. But Janet Yellen, the new Fed chair, didn’t leave investors in
the dark.
Instead, she listed five gauges that make up her
"dashboard" for tracking the economy. She also specified, in some cases,
when those measures would signal a healthy economy.
The issue
arose because Fed policymakers, like many economists, worry that the
unemployment rate might be overstating the health of the economy. The
rate has fallen by a full percentage point in the past year. But much of
the drop occurred because fewer Americans are working or looking for
work. The government doesn’t count people as unemployed unless they’re
actively searching for jobs.
For those who want to track the
economy along with Yellen, here are the items she listed during a news
conference Wednesday, her first as Fed chair:
— THE U-6:
It
might sound like the name of an Irish rock band. But it’s a broader
measure of the job market. It includes not only the unemployed but also
those working part time who would prefer full-time work and those who
have stopped searching for jobs. Last month, the U-6 rate was 12.6
percent, much higher than the unemployment rate of 6.7 percent. Yellen
said the number of Americans forced to work part time is "unusually
large." It suggests that she believes the Fed could do more to boost the
economy.
— LONG_TERM UNEMPLOYED:
One particularly brutal
aspect of the Great Recession and its aftermath is that millions of
laid-off people have struggled to find jobs. In April 2010, 45 percent
of the unemployed had been out of work for six months or longer, a
record. This proportion has since declined to 37 percent. But that’s
still far higher than the pre-recession figure of just 17 percent.
Yellen said it "has been immensely high and can be very stubborn" to
bring down.
— LABOR FORCE PARTICIPATION RATE:
This measure
is critical to evaluating the job market’s health. It tracks how many
people are either working or looking for work. In December, it fell to
its lowest level in 35 years before recovering slightly. More
retirements by baby boomers account for much of the drop. But Yellen
said this rate has also fallen because some of the unemployed have given
up looking for work. They could start searching again as the economy
improves. If so, they could push up the unemployment rate.
— QUITTING AND HIRING:
In
a healthy economy, more Americans quit their jobs. That’s because they
either have a new job — usually with higher pay — or they’re confident
they can find another. That makes quitting a reliable measure of the job
market’s health. The government also tracks the overall number of
people hired each month. That’s separate from the net increase in jobs
included in each month’s employment report, because a strong net job
gain can reflect mainly very few layoffs. Yellen wants to see whether
employers are actively adding workers. The number of people quitting
jobs has partly recovered from the recession. But Yellen noted that
hiring "remains extremely depressed."
— WAGE GROWTH:
Yellen
highlighted what everyone who has gone without a decent raise for
several years knows: "Wage growth has really been very low." Average pay
is rising at a 2 percent annual pace, before inflation, she said — well
below the 3 percent to 4 percent rate she cited as typical of a healthy
economy.
Many of these indicators point to a weaker job market
than the unemployment rate would suggest. That’s probably why Yellen
said the economy is "not close to full employment," despite the steady
decline in the unemployment rate.
But her assessment wasn’t all
gloomy. The "dial on virtually all of those things is moving in a
direction of improvement," she said.
___
Follow Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber .
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