Courtesy of Mish.
The word of the day is “uncertain”. It appears a number of times (in various forms) in Fed Chair Janet Yellen’s speech on Recent Developments and the Outlook for the Economy at the City Club of Cleveland, Cleveland, Ohio.
Here are some Yellen Yap snips, emphasis in italics and some subtitles mine.
Employment Slack
It is my judgment that the lower level of the unemployment rate today probably does not fully capture the extent of slack remaining in the labor market–in other words, how far away we are from a full-employment economy.
Part-Time Jobs
Another factor we consider when assessing labor market slack is the elevated number of workers who are employed in part-time jobs but would prefer to have full-time work–in other words, those classified as “part time for economic reasons.” At around 4-1/2 percent of employment, the share of such workers is notably larger than has been historically typical in a growing economy.
Some portion of the greater share of workers who are part time for economic reasons may reflect structural rather than cyclical factors. For example, the ongoing shift in employment away from manufacturing and toward services, a sector which historically relied more heavily on part-time workers, may be boosting the share of part-time jobs. Despite these structural trends, which make it difficult to know where the share of those employed part time for economic reasons may settle in the longer run, I continue to think that it probably remains higher than it would be in a full-employment economy.
Other indicators also generally corroborate the view that while the labor market has improved, it still has not fully recovered. For example, the rate at which employees quit their jobs for other opportunities has tended to go up in a strong economy, since more workers voluntarily leave their jobs when they have greater confidence about their ability to find new ones and when firms are competing more actively for new hires. Indeed, the quits rate has picked up as the labor market has improved over the past few years, but it still is not as high as it was through much of the early 2000s.
Wages
The pace of wage increases also may help shed some light on the degree of labor market slack, since wage movements historically have tended to respond to the degree of tightness in the labor market. Here too, however, the signal is not entirely clear, as other factors such as longer-run trends in productivity growth also generally influence the growth of compensation. Key measures of hourly labor compensation rose at an annual rate of only around 2 percent through most of the recovery. More recently, however, some tentative hints of a pickup in the pace of wage gains may indicate that the objective of full employment is coming closer into view.
Inflation
The stronger dollar has pushed down the prices of imported goods, and that, in turn, has put downward pressure on core inflation. In addition, the plunge in oil prices may have had some indirect effects in holding down the prices of non-energy items in core inflation, as producers passed on to their customers some of the cost savings from lower energy prices. In all, however, these downward pressures seem to be abating, and the effects of these transitory factors are expected to fall out of measures of inflation by early next year. …
