Still a Question Mark' Around Full Employment, Fed's Brainard Says -- Update
May 22 2017 - 9:47PM
Dow Jones News
By David Harrison
It is too soon to declare victory on the labor market's recovery
from the recession despite recent improvements, Federal Reserve
Governor Lael Brainard said Monday.
"For me I think there's still a question mark around are we
there yet," she said.
Speaking at a conference organized by the Federal Reserve Bank
of Minneapolis, Ms. Brainard said Fed researchers estimate the
labor market is now strong enough to absorb new people looking for
work. But that has not translated into accelerating inflation,
suggesting there might be more room for improvement in employment,
she said.
"We really aren't seeing much progress on core inflation," she
said. "If anything the last few months we've seen some stalling out
of core inflation."
Core prices, which strip out volatile food and energy prices,
fell in March from the prior months for the first time since 2010.
Analysts blamed changes in cellphone plan pricing but the drop has
raised worries that the economy might be slowing down.
Ms. Brainard didn't discuss the prospect of another interest
rate increase at the Fed's June meeting. But her comments suggest
she remains concerned about the health of the labor market.
Over the past few weeks, several Fed officials have said the
labor market has returned to full employment, which means every
worker looking for a job can find one. Ms. Brainard's remarks
indicate some skepticism that employment is back to full
strength.
She said the Fed "will continue to navigate the recovery" to
achieve the central bank's twin goals of low, stable inflation and
full employment.
In the past, Ms. Brainard has been one of the central bank's
most outspoken advocates of moving cautiously to raise interest
rates, arguing that holding down borrowing costs helps struggling
workers and households get back on their feet. But she supported
the Fed's most recent rate increase, in March.
Projections from Fed officials anticipate two more
quarter-percentage-point rate increases this year and many traders,
analysts and economists expect the next rate increase to come next
month.
In her prepared remarks she said Fed officials need to look at
how different demographic groups are faring in the labor market as
they make monetary policy decisions.
"Understanding these barriers and efforts to address them is
vital in assessing maximum employment as well as potential growth,"
she said. "Maximum employment is inherently an inclusive goal."
One of the Fed's mandates from Congress is to use monetary
policy to keep the labor market functioning at full strength so
that essentially all those who want a job can find one. But it
isn't always easy to tell when that goal has been met. Ms. Brainard
said officials need to keep in mind that full employment evolves
over time, depending on economic conditions.
If certain groups continue to struggle even though the overall
unemployment rate is falling, that suggests the goal of full
employment hasn't yet been met, she said, pointing to the recent,
uneven economic recovery in which black workers or workers with
less education have struggled more than their white or
better-educated counterparts.
The Fed held interest rates near zero for seven years while the
unemployment rate fell to draw workers back into the labor force.
The central bank's benchmark short-term interest rate is still very
low -- in a range between 0.75% and 1%--though the unemployment
rate has fallen to 4.4% in April, which is below many estimates of
maximum employment.
"This approach to maximum employment has allowed [the Fed] to
navigate the current recovery in a way that has likely brought more
people back into productive employment than might have been the
case with a fixed, aggregate unemployment-rate target based in
precrisis norms," she said.
Write to David Harrison at david.harrison@wsj.com
(END) Dow Jones Newswires
May 22, 2017 21:32 ET (01:32 GMT)
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