Monday, June 06, 2016

Yellen: Current Conditions and the Outlook for the U.S. Economy

by Bill McBride on 6/06/2016 12:36:00 PM

The speech may be viewed here live.

From Fed Chair Janet Yellen: Current Conditions and the Outlook for the U.S. Economy Excerpts:

[T]he overall labor market situation has been quite positive. In that context, this past Friday's labor market report was disappointing. Payroll gains were reported to have been much smaller in April and May than earlier in the year, averaging only about 80,000 per month.2 And while the unemployment rate was reported to have fallen further in May, that decline occurred not because more people had jobs but because fewer people reported that they were actively seeking work. A broader measure of labor market slack that includes workers marginally attached to the workforce and those working part-time who would prefer full-time work was unchanged. An encouraging aspect of the report, however, was that average hourly earnings for all employees in the nonfarm private sector increased 2-1/2 percent over the past 12 months--a bit faster than in recent years and a welcome indication that wage growth may finally be picking up.

Although this recent labor market report was, on balance, concerning, let me emphasize that one should never attach too much significance to any single monthly report. Other timely indicators from the labor market have been more positive. For example, the number of people filing new claims for unemployment insurance--which can be a good early indicator of changes in labor market conditions--remains quite low, and the public's perceptions of the health of the labor market, as reported in various consumer surveys, remain positive. That said, the monthly labor market report is an important economic indicator, and so we will need to watch labor market developments carefully.
Yellen remains cautiously optimistic, but no indication of a rate increase in June.