Janet Yellen, the first woman to lead the country’s central bank, said Monday it is clear that the U.S. economy is still “considerably short” of two of the Fed’s goals: maximum employment and a steady inflation rate.
She said she and most of the members of the Federal Open Market Committee estimate that maximum sustainable employment would mean an unemployment rate between 5.2 percent and 5.6 percent, well below the latest February rate of 6.7 percent.
In Illinois, the unemployment rate was 8.7 percent in February — the latest data available. The unemployment rate is 9.5 percent in Chicago and 8.5 percent in the greater Chicago area, Yellen said.
Even though inflation is well below 2 percent — the Fed’s longer-term goal — Yellen said times are too hard to change that policy while ordinary Americans still struggle.
“The economy and the job market are not back to normal health,” she said. “That will not be news to many of you, or to the 348,000 people in and around Chicago who were counted as looking for work in January.”
Here are some of the sobering statistics Yellen cited:
• Workers’ wages have increased only a little more than 2 percent per year since the recession — “very low by historical standards.”
• The long-term unemployed — “the extraordinarily large share of the unemployed who have been out of work for six months or more” — find it hard to find steady, regular work, and they appear to be at a “severe competitive disadvantage when trying to find a job.”
• New hiring is slow and fewer people are quitting their jobs, indicating a sluggish job market.
Her remarks reflected her previous commitment to keep the federal funds rate at a steady rate until “well past the time that the unemployment rate declines below 6.5 percent,” meaning that the Fed can continue to focus on stimulating job creation and growth without worrying too much about rises in the consumer price index.
She spoke Monday to the National Interagency Community Reinvestment Conference at the Hyatt Regency Chicago, whose members run programs that lend money to ensure community development, particularly in needy areas.
Yellen recounted specific stories of people hurt by the recession, including Dorine Poole, who lost her job processing medical insurance claims after 15 years and couldn’t find another job for two years, and Jermaine Brownlee, an apprentice plumber and construction worker who had to take a lower-wage job after scrambling for odd jobs and temporary work.
About 10.5 million workers are unemployed. The number of long-term unemployed, those jobless for 27 weeks or more, rose to 3.8 million and accounted for 37 percent of the unemployed in February.
Yellen believes the Fed can stimulate demand and bring down unemployment.
One of her arguments is that only “a small portion” of the rise in unemployment is due to so-called structural factors, such as the mismatch between workers’ skills and the jobs that are available.
“The government has the tools to address cyclical unemployment,” she said. For millions dislocated by the recession, Yellen said she believes the Fed’s policies can give them hope for better employment ahead.
After her speech, Yellen toured Daley College, one of the City Colleges of Chicago, where students and graduates told her how crucial it was to gain skills in demand such as welding, manufacturing and machine-tool operations.
“The younger generation probably has a stigma that manufacturing jobs are where you get dirty and smell like oil, but today it’s nothing like that,” said Shaylo Davis, who is pursuing a basic welding certificate after having worked in retail management.
He said he sees the return of some manufacturing work to America — a trend known as reshoring — as “a return of the middle class” because of the wages and benefits these jobs bring.