, Columnist
Full Employment Is Still a Long Way Off
Labor-market slack, along with benign wage and inflation numbers, are posing a conundrum for the Fed.
Watching the signs.
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Even before the U.S. jobs report released Sept. 1 suggested that wage pressures remained muted, financial markets had been confused about the intentions of the Federal Reserve. In response to investor concerns, I would suggest that the economy is nowhere near full employment.
An unemployment rate ranging between 4.3 percent and 4.4 percent over the past three months suggested to many that the economy was at, or close to, full employment. That, combined with the surge of the Fed’s balance sheet from about $800 billion in late 2008 to the current $4.5 trillion, was expected by an overwhelming number of investors, and by the central bank itself, to push wages and prices to much higher levels.