In her years as a Federal Reserve official (governor, district bank president, and vice chair), Janet Yellen expressed a greater concern about job conditions than her peers. As expected, that emphasis has continued into her tenure as Fed chair.
The unemployment rate has fallen, but that’s largely due to individuals having exited the labor force. Yellen views the broader U-6 measure of unemployment as “exceptionally high.”
The share of long-term unemployment has been “immensely high,” according to Yellen ( “that’s certainly on my dashboard”). Bear in mind that the official figures are likely understated, as many of these individuals will give up looking for a job and will therefore not be officially counted as “unemployed.”
Some of the decrease in labor force participation is demographic, reflecting the aging of the population. However, there is a “depressed cyclical component,” which should reverse as the economy strengthens.
Measures of labor market turnover remain remarkably low. Yellen noted that “typically, a large share of workers quit their jobs every month, usually going directly into another job.” When workers are worried they won’t be able to get other jobs, they show a reduced willingness to quit. In addition, the hiring rate is “extremely depressed,” according to Yellen.
Yellen sees wage growth as “very low,” another sign of slack. Clearly, we have a long way to go for a full recovery in jobs.
