Last week saw the most upbeat jobs report since the onset of the recession. As reported by the Associated Press and posted on Inc.com, employers added an average of 244,000 jobs a month since February, “the best six-month hiring spree in eight years.”
The time could be ripe for Federal Reserve Chair Janet Yellen and the Federal Open Market Committee to vote to raise interest rates.
But before Yellen and her colleagues take this momentous step, which could jar investors, they will have to make a careful prognosis of the job market, says the AP. Underneath the glossy veneer of platitudes and hyperbole, there are troubling signals that the U.S. economy has still not fully recovered.
Here are five items on Yellen’s jobs market “dashboard” that she will presumably be watching closely:
Wages: Even though there has been an upsurge in job gains, “most Americans have received little or no meaningful pay raise,” notes AP. Average hourly earnings ticked up only a penny in July. As Yellen said back in March, as cited by the newswire, “hourly pay typically rises 3% to 4% in a healthy economy.”
Part-Time Unemployment: About 7.5 million Americans are working part-time but would prefer full-time jobs. Although this figure is down from a peak of 9.2 million in 2010, it is still “substantially” higher than the 4.5 million number recorded in December 2007, at the start of the recession. “Businesses are still cautious about hiring,” says the AP.
Long-Term Unemployment: The number of Americans who have been unemployed for more than six months “rose 74,000 to nearly 3.2 million in July, far above the pre-recession figure of 1.3 million,” according to the AP. Yellen says this group faces a catch-22 situation: the longer they’re unemployed, the more likely employers will not hire them.
Workforce Participation: The positive job gains report reveals a disturbing dichotomy: the number of “working-age adults who either have a job or are looking for one has tumbled since the recession began, from 66% to 62.9%,” according to the AP. Job search drop-outs may be a big reason for falling unemployment.
Quitting and Hiring: A healthy economy can lead more people to quit their jobs, because they get a new position with higher pay or they believe they can find one, says the AP. When there is a vacant position, it can add to job market openings and lead to an unemployed person landing a job. But although “quits” have risen since the recession ended, they are still “below levels consistent with a healthy economy,” says the AP.
Photo: U.S. Federal Reserve