Deciding if the Labor Market is Okay

Determining how to steer monetary policy, Federal Reserve Chair Janet Yellen reportedly has a “dashboard.” With indicators that relate to inflation, jobs, growth and markets, the dashboard lets her know when to brake and accelerate the economy.

So, on this Labor Day Weekend, let’s see what the jobs indicators on her dashboard are telling her.

The Labor Dashboard

Although the Great Recession ended in June 2009, still we are not entirely back to where we started. Yes, the job openings and layoffs/discharges rates and non-farm payrolls are back to normal:

All labor market infographics are from Bloomberg.

However, the unemployment rate, the hires rate and the U-6 underemployment rate are not back to where they were six years ago:

And the quits rate, long-term unemployed share and participation rate have more of a ways to go:

Our Bottom Line: Monetary Policy

During an April 2014 talk, Dr. Yellen spoke about labor market slack. Oversimplifying, we can say she means we are underutilizing our labor force. The big question is how much the nine labor indicators reflect remaining recessionary slack. And the bigger question involves whether the slack is sufficient to delay a rate hike.