Yellen’s Labor Market Gauges Showed Improvement in May

While the unemployment rate remained unchanged at 6.3 percent in May, other labor-market indicators watched by Federal Reserve Chair Janet Yellen showed improvement.

Among them: the share of jobless Americans who have been out of work for six months or longer fell, as did the median duration of unemployment, Labor Department figures showed today.

The data support Yellen’s strategy of keeping borrowing costs low as she focuses on healing parts of the labor market that aren’t captured by the main jobless rate, which is at the lowest level in almost six years.

The Fed should view the job report “broadly positively,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “Most of the labor market indicators that are in Janet Yellen’s dashboard saw very small improvement,” giving policy makers “no reason to deviate off course, but no reason to get too excited either.”

Today’s report, while positive, doesn’t put pressure on the central bank to accelerate the timing of its first interest-rate increase since 2006 for now, according to Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. He said policy makers meeting June 17-18 will probably continue reducing their monthly bond purchases.

The number of people unemployed for 27 weeks or longer as a share of the total jobless dropped to 34.6 percent in May, the lowest since August 2009, from 35.3 percent in April, the report also showed. The median duration of unemployment decreased to 14.6 weeks from 16 weeks.

Part-Time Workers

The underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking -- fell to 12.2 percent, the lowest since October 2008, from 12.3 percent.

The so-called participation rate, which measures the share of working-age people in the labor force, held at 62.8 percent, matching the lowest since March 1978.

Average hourly earnings of production and nonsupervisory employees rose 2.4 percent from a year earlier in May, accelerating from April’s 2.3 percent pace of year-on-year growth. That compares with the historical average of 4.3 percent, based on data from January 1965 to present.

Employers added 217,000 jobs last month, pushing payrolls past their pre-recession peak. It was the fourth straight month payrolls have increased at least 200,000, the first time that’s happened since September 1999 to January 2000.

The Standard & Poor’s 500 Index rose 0.4 percent to 1,948.26 at 2:05 p.m., while the yield on the benchmark 10-year Treasury note increased 0.01 percentage point to 2.59 percent.

‘Easy Policy’

“Today’s report indicated that labor-market slack is diminishing, albeit slowly and that wage growth remains subdued,” Dwyer and Laura Rosner said in a research note. “Both suggest the FOMC has latitude to maintain an easy policy stance.”

The unemployment rate has fallen faster than policy makers expected. In December, Fed officials forecast that unemployment would fall to 6.3 percent to 6.6 percent by the end of this year, according to the median of their estimates. In March, they reduced their year-end projections to 6.1 percent to 6.3 percent.

If the labor market improves at a similar rate, Dutta said, “it’s going to be appropriate in the next six months to start talking about raising the fed funds rate sooner than people expect.”

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