FXStreet (Guatemala) - Michael S. Hanson, US Economist at BAML told us that, on Friday morning, at the Jackson Hole Symposium, Fed Chair Janet Yellen will give a speech entitled simply, "Labor Markets”.
“Her comments follow less than a month after the July FOMC statement insisted that "a range of labor market indicators" point to "significant underutilization of labor resources." We do not expect Yellen to deviate from this message, which was designed in part to convince markets to not focus simply on the standard unemployment rate."
"Yes, it has fallen more quickly than anticipated, and, yes, is nearing the NAIRU (which the FOMC estimates at around 5.4%). But in the Fed's view, the labor underutilization is larger and more persistent than the current 6.2% unemployment rate suggests."
"Specifically, many Fed officials think the standard unemployment rate (the "U3" measure) understates just how much slack remains for two main reasons: the rise in discouraged workers-that is, the part of the drop in participation that could reverse-and the rise in part-time workers who want full-time work. "hHigher-order" measures of under-employment suggest the broader labor market is still healing…and slowly."
"This is one of several reasons why we expect the Fed to maintain a very patient policy stance. The Fed is looking not only for improvement in these and other measures of utilization, but also for several consecutive quarters of above-trend GDP growth and for a sustained pickup in wage growth. As we have noted elsewhere, the only discussion of hiking at Jackson Hole is likely to be about the mountain trails."