Friday’s jobs report showed that U.S. labor markets are making progress, but likely not enough to convince Federal Reserve officials that it’s time to pull back on the easy-money programs they’ve put in place to rev up economic growth and hiring.
According to a report by The Wall Street Journal, when the Fed next meets March 19-20, officials are likely to acknowledge job-market improvements in recent months. But their recent comments suggest they are unlikely to shift from their plan to purchase $85 billion per month of Treasury and mortgage-backed securities to help keep short-term interest rates pinned near zero.
Much of the research coming out of the Fed in recent months has found notable benefits from bond buying in the form of lower long-term interest rates, which help to drive spending and investment, particularly interest-sensitive sectors like housing. However internal and outside critics worry the programs could fuel higher inflation or market instability
Top Fed officials have made clear that the labor market’s health is their primary worry right now, and it’s the main factor in determining how long they will continue the bond-buying program. The Fed has said it wants to see “substantial progress” in the job market before pulling back on bond buying, which would require several more encouraging job reports like Friday’s.
Payroll gains have averaged 205,000 per month for the past four. That’s one important sign of progress, but Fed officials have reservations about concluding too quickly that the job market has healed or that the outlook for job growth has turned substantially better.
The unemployment rate, at 7.7% in February, is little changed since September, when it was 7.8%. Fed Vice Chairwoman Janet Yellen in a speech Monday, said “the unemployment rate is probably the best single indicator of current labor market conditions.”
Other details in Friday’s unemployment statistics suggested a job market not yet back to full health. More than 100,000 Americans left the labor force in February and the share of the population that’s employed, at 58.6%, hasn’t improved in the past year. Meantime, the share of workers who have been unemployed for six months or more inched up in February, as did the number of Americans who wanted full-time work but could only find part-time jobs.