Federal Reserve Chair Janet Yellen claimed Monday during a speech in Philadelphia the economic recovery has been positive but admitted the latest jobs report is discouraging.
The U.S. economy has faced a dismally slow economic recovery since the last recession ended in 2009 compared to past recoveries. President Barack Obama blamed the slow recovery on Republicans March 4 while praising the few successes on his agenda. Yellen echoed the claims the recovery has been successful while admitting the May jobs report released Friday should be a point of concern.
“The overall labor market situation has been quite positive,” Yellen said in her speech to the The World Affairs Council. “In that context, this past Friday’s labor market report was disappointing. Payroll gains were reported to have been much smaller in April and May than earlier in the year, averaging only about 80,000 per month.”
The Bureau of Labor Statistics (BLS) found in its monthly report the economy only gained 38,000 new jobs. The small job growth was a drastic drop for the already slow recovery, which has averaged 219,000 new jobs per month over the last year. Yellen added the slight drop in unemployment to 4.7 percent was not necessarily a good sign either.
“And while the unemployment rate was reported to have fallen further in May, that decline occurred not because more people had jobs but because fewer people reported that they were actively seeking work,” Yellen noted. “A broader measure of labor market slack that includes workers marginally attached to the workforce and those working part-time who would prefer full-time work was unchanged.”
The unemployment rate does not track those no longer seeking work or those who have suffered long-term joblessness. The labor force participation is a separate measure which tracks everyone in the workforce as a percentage of the population. The participation rate decreased by 0.2 percentage points and now sits at 62.6 percent.
“An encouraging aspect of the report, however, was that average hourly earnings for all employees in the nonfarm private sector increased 2-1/2 percent over the past 12 months,” Yellen continued. “A bit faster than in recent years and a welcome indication that wage growth may finally be picking up.”
Nevertheless the report found that wage growth has also dropped and only averaged five additional cents in May. Yellen stressed that while the report is concerning, one month of data doesn’t necessarily indicate upcoming economic trends. Jobs report in the coming month will more reliably show if there is a further slowdown in economic growth.
“Although this recent labor market report was, on balance, concerning, let me emphasize that one should never attach too much significance to any single monthly report,” Yellen also stated. “Other timely indicators from the labor market have been more positive. For example, the number of people filing new claims for unemployment insurance.”
The president entered office in the midst of a severe economic downturn which has since been referred to as the Great Recession. It was sparked by the subprime mortgage crisis and the financial crisis of 2007. The recovery took years to begin and has since been incredibly slow.
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