Janet Yellen, Spokesperson and Chair of the Federal Reserve Board of Governors, debriefed the public Sept. 17, 2014 on Federal Open Market Committee (FOMC) projections during a scheduled press conference. Federal Reserve System debriefed slow wage increases and explained contributing factors of lagging unemployment rates. Yellen also outlined normalization efforts to return the economy back to pre-recessions conditions, by 2017.
According to the Committee, the economy has shown signs of growth over the last five years and economic conditions show signs of continuous improvement for the next five years. When questioned how the FOMC plans to continue stimulating the U.S. economy while maintaining job growth and inflation, Chairwoman Yellen diplomatically responded, “it’s necessary and appropriate to have a somewhat more accommodating policy.”
During the press conference, Chair Yellen confirmed that the economy showed sufficient signs of full recovery to pre-recession status, and that the country has come a long way. At the height of the economic crisis, over 10% of the workforce was without jobs. But with only moderate increases in jobs and wages, impacts to the Federal Reserve System caused by the 2008 recessions were deep and far-reaching.
As the Federal Reserve modifies interests and inflation rates, commonly referred to as monetary policy, the labor market is not seeing overall “significant” increases in wage. Changes in Federal Reserve System monetary policy can ignite a chain of events that affects prices of goods and services, long-term and short-term interests rates, foreign exchange rates, the availability of money, and issuance of money on credit, along with a host of other variables.
Yellen explained that the labor market has not totally recovered. Although recent job growth is increasing, it has somewhat slowed compared to previous months, and outside of this optimism the Federal Reserve System debriefed slow wage increases. At a rate of 200,000 jobs per month, the Committee will maintain market gains and closely monitor the direction of unemployment to avoid unexpected changes.
The Committee expects that unemployment should continue to improve, as will raising prices over the next few years. The FOMC seeks to meet its objective to stabilize the economy within this time span.
Currently, data from the Federal Reserve’s website shows inflation ranging between 1.5 and 1.7 percent. By late 2016 or early 2017, inflation is expected to eventually reach its normal target of 2 percent. Americans can expect to see a rise in consumer inflation with raising prices of goods and services.
As the FOMC tries to fully understand labor dynamics, the spokeswoman is certain that “There are still too many people who want jobs but cannot find them, too many who are working part-time but would prefer full-time work, and too many who are not searching for a job, but would be if the labor market were stronger.” As Yellen points out, the labor market continues to experience “significant underutilization of labor resources.”
Yellen explained that what the public is seeing in wages is essentially a reflection of the market conditions mentioned earlier. Committee statements imply that, since the workforce is not fully convinced that full-time work is available, many have stopped looking and many workers do not know where to find adequate work. As market conditions continue to improve the Committee is hopeful that more Americans will find full-time employment. Before ending the press conference, Yellen stopped short of providing too much detail on contributing factors supporting why the Federal Reserve System debriefed slow wage increases. She stated that alternative indicators used to measure unemployment rates are being reviewed. Steps to correct slow wage increases among labor resources are pending better data and further discussions.
By Carolette Wright
Photo by NCinDC – Flickr