Federal Reserve Chair Janet Yellen
said Monday that America's unemployment rate had fallen "a little bit
below" what she and some of her colleagues on the Federal Open Market
Committee consider to be full employment.
Yellen and her fellow central bankers have
repeatedly suggested the labor market – which is currently in the midst
of a record-setting 78 consecutive months of expansion – has been
nearing an optimal level of sustainable health. But few have said
explicitly that the jobs landscape had reached what the Fed refers to as
full employment.
But during a Q&A session Monday at the
University of Michigan's Ford School of Public Policy, the Fed chief
appeared to acknowledge as much, saying the country's unemployment rate –
which in March fell to 4.5 percent, its lowest level since mid-2007 –
had crept beyond the Fed's ideal target.
"With an unemployment rate that stands at 4.5
percent, that's even a little bit below what most of my colleagues and I
would take as a marker of where full employment is," Yellen said. "I'd
say we're doing pretty well."
Such comments don't necessarily mean the Fed has
overshot its employment goals and that it will need to raise its
benchmark interest rate more rapidly than previously indicated. Indeed,
Yellen went on to note that she and her colleagues are aiming for rates
to rise "gradually" and that they "don't want to be in a position where
we'd have to raise rates rapidly, which could conceivably cause another
recession."
But Yellen during her appearance was still
notably hawkish for a central banker traditionally considered to be a
dove. She said in describing the Fed's response to the Great Recession –
which involved lowering the central bank's benchmark interest rate to
near-zero levels – that she "simply could not have imagined" the rate
would be so low "for as long as it turned out to be, which was seven
full years."
Her comments also appeared to be her most
explicit acknowledgment to date that full employment may have finally
arrived for the U.S. economy nearly a decade after the recession began.
"In the aftermath of the financial crisis, with
unemployment at exceptionally high levels and inflation running well
under our 2-percent objectives, we really gave to monetary policy all
that we had," Yellen said, noting that she and her colleagues at the
time "had our foot pressed down on the gas pedal trying to give the
economy all the oomph we possibly could."
Still, she clearly separated unemployment
progress – and even improvements enjoyed by the broader labor market –
from actual economic growth.
"A depressing fact about the U.S. performance is
that really throughout the recovery, growth has averaged 2 percent. And
that's been accompanied by an improving labor market," she said,
ultimately describing the national unemployment rate as "a misleading
indicator of the extent of slack in the U.S. labor market."
The national unemployment rate has fallen under
scrutiny in recent months as the metric continued to decline while
President Donald Trump – who was at the time a Republican hopeful to win
the Oval Office – called into question its accuracy. He repeatedly
referred to the statistic as "phony" and called the metric "one of the
biggest hoaxes in American modern politics."
The rate measures how many individuals are
either employed or actively looking for work at a given time, meaning
those who aren't sending out resumes – either because they're in school
or retired or have simply abandoned trying to get a job – aren't
counted.
Yellen acknowledged as much during her Monday
appearance, stating that the metric is a helpful benchmark for the Fed
but is hardly a perfect representation of America's economic landscape.
"I think we have a healthy economy now, but it's
been a long-time coming," she said, indicating that she hopes to ensure
that it "continues to operate around full employment."
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