The nation’s official jobless rate has steadily fallen to its present 5.5% as of the last reporting. The Feds say that is at the top of the range policy makers consider to be "full employment." But Janet Yellen, an American economist, and Chair of the Board of Governors of the Federal Reserve System, says the broader unemployment measure, called the U-6 by the Labor Department, is actually 11% as of February.
The figure “definitely shows a less rosy picture,” Yellen told lawmakers last month according to this article in The Wall Street Journal. “We don’t, at this point, in spite of the fact the unemployment rate has come down, don’t feel that we have achieved so-called maximum employment in part for these very reasons.”
Weak wage growth
Wage growth remains weak, a reflection of relatively weak demand for labor.
And a historically small proportion of Americans are actually working or actively looking for jobs.
The broader, 11% figure is elevated over the official unemployment rate because it includes those who have given up looking for work and those stuck in part-time jobs.
Average hourly earnings have grown just 2% over the past year according to the WSJ piece, and the labor-force participation rate is hovering near the lowest levels since the 1970s.
Economists say a tighter labor market would be putting upward pressure on wages, which in turn should draw more Americans back into the job market.
Closing the gap
Economists Andrew Levin, a visiting scholar in the research department at the International Monetary Fund while on leave from his position at the Federal Reserve, and David Blanchflower, a Professor of Economics at Dartmouth, developed what they call the “employment gap.”
That measures unemployment, labor-force participation and underemployment against expectations consistent with full employment.
The pair contend the U.S. economy needs to add about 2.8 million full-time jobs to return to full employment. To do so, employers would need to add jobs in the next 12 months at the same rapid clip it averaged over the past 12 months.
More jobs can't come fast enough for Detroit resident Paul Mann. The WSJ says he is among the employed struggling to make ends meet, working 25 hours a week as a server at an upscale Detroit restaurant, and additional hours as a chair masseur at special events.
He says he would much prefer having one full-time job as opposed to eking out a meager living through several of them. But he told the WSJ he fears he’ll never hold such a job again.
“If I could get a full-time job, even at a call center, with health insurance, I’d take it in a heartbeat,” said the 50-year-old Mann, who recently moved back in to his mother's home. “I didn’t think I’d be struggling like this at my age.”
There may be a little help ahead for workers such as Paul Mann on the wage front. Eventually.
Janet Yellen just held a news conference on Wednesday, saying that she was not going to raise interest rates, something that Wall Street feared.
Fed leaders now forecast unemployment rates in 2016 and 2017 to be a bit below what many view as the long-term sustainable level, which experts say might translate into rising wages for many workers.
In other words, according to The New York Times, "they want to run the economy a little hot for the next couple of years" to help create some wage gains.