Janet Yellen, sizing up a “far from satisfactory” labor market, said she’s especially focused on a three-decade low in the proportion of working-age adults holding or seeking jobs.
“I will be looking very carefully at trends in labor force participation,” the Federal Reserve chair told lawmakers today in Washington. The key question is whether participation is dropping because baby boomers are retiring, or because economic growth is still sluggish almost five years after the recession ended, she said.
“We really need to figure out what portion of the labor force participation-rate decline is secular and what part is cyclical,” Yellen said to the Joint Economic Committee in response to a question from Senator Robert Casey, a Democrat from Pennsylvania. “The weak state of the labor market partly explains why we’ve see a decline in labor-force participation.”
The rate slumped to 62.8 percent last month, matching the lowest level since 1978, even as payrolls rose more than forecast and the jobless rate fell to 6.3 percent, the lowest since September 2008. While unable to shape demographic trends, the Fed through stimulus can help spur economic growth.
The slumping participation rate, along with indicators including average hourly earnings and the number of Americans working part-time, suggest the economy will need “extraordinary support” from the Fed for “some time to come,” Yellen said March 31 in Chicago.
The number of people working part-time because they could’t find full-time jobs rose by 54,000 to 7.47 million in April, and average hourly earnings growth tumbled to 1.9 percent from a year earlier.
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