It’s Jobs Day. Here’s What Yellen, the White House and Others Will Look For – Real Time Economics

Job seekers wait in line earlier this summer to meet with recruiters during a job fair in Philadelphia.
Associated Press

For the mere bystander, the monthly jobs report offers a simple tidbit or two on the health of the U.S. labor market. Did the unemployment rate go up or down? How many jobs were lost or gained?

It’s a far different story for the hundreds of aficionados—bank economists, White House advisers, Federal Reserve officials—who will plunge into Friday’s report on the July jobs picture for answers to far deeper questions.

Weighing in at around 40 pages, the jobs report gives economists an unusually rich dive into the innards of the U.S. labor market. Of the nine or so indicators Fed Chairwoman Janet Yellen monitors to assess the health of the labor market, five come from the Labor Department’s monthly data dump on the U.S. “Employment Situation.”

Here is a quick guide for what she and others will look for, and why it matters:

  • The jobless rate. Nothing gets more attention than the basic meter of the unemployed as a percentage of the labor market. If left with nothing else, Ms. Yellen says she would go with this measure, known as U3. It hit 10% in October 2009, and has now sunk to 6.1%. The Fed once said it would weigh increasing short-term interest rates if the jobless rate dipped below 6.5%, but scrapped that measure earlier this year.
  • Longterm unemployed. The share of the unemployed who have been out of job for longer than 27 weeks—33% as of June—is at the heart of a long-running debate within the Fed and among outside economists. Bringing these workers back into the workforce will be a sign of economic vitality, but could also spark wage and inflation pressures.
  • Labor force participation. The percentage of working age Americans who are actually working has slipped steadily since 2000 and hit 62.8% in June, down from over 67% at its height. Reversing that slide is a central concern for the Fed and the White House, but the levers for doing it are limited.
  • Wages. Few barometers measure the health of a labor market quite like fluctuations in the price of labor. Wage growth has been sluggish for years—it was up just 2% last month over the year before—but some new data has flickered at stronger wage pressures. Friday’s report will give a better sign of whether that rise is real.
  • The discouraged. Nearly 7.5 million people in June were working part-time jobs because they couldn’t find anything more. They are part of a much larger group—12.1% of the workforce—who are underemployed, unemployed or discouraged, but want to work, a group that falls under the broadest measure of the unemployed, the so-called U6.
  • Slack. The jobs report won’t have a line for this most elusive of concepts because it is, in many ways, a catch-all for all of the above. But when the Fed chews on interest-rate policy and the health of the labor market, it talks about slack. In its policy statement Wednesday, the Fed spoke of signs of improvement but warned “a range of labor market indicators suggests that there remains significant underutilization of labor resources.” As soon as those resources become better utilized, the market will lose more of its slack, wages will increase, the jobless rate will go down still further, and the Fed will inevitably move to raise rates. The July numbers will offer more hints as to when that might happen.



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1 August 2014 | 10:48 am – Source:

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