Why Yellen says the unemployment rate is an incomplete barometer



Assessing employment

The speech by Fed Chair Janet Yellen at the National Interagency Community Reinvestment Conference in Chicago on March 31 highlighted her stance on the unemployment rate not being a complete barometer of employment. Yellen believes there are many important things that aren’t represented in the unemployment rate alone.

For example, many Americans lost a full-time job in the recession and seem stuck working part-time. The unemployment rate is down, but not included in that rate are more than 7 million people are working part-time but wanting a full-time job. As a share of the workforce, that number is very high historically.

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Referring to the personal stories she had shared (refer to Part 3 of this series), Yellen said that they’re a reminder that there are real people behind the statistics, struggling to get by and eager for the opportunity to build better lives. Moreover, their experiences show some of the uniquely challenging and lasting effects of the Great Recession. Recognizing and trying to understand these effects helps provide a clearer picture of the progress we’ve made in the recovery, as well as a view of just how far we still have to go.

When the Federal Reserve’s policies are effective, they improve the welfare of everyone who benefits from a stronger economy—most of all those who’ve been hit the hardest by the recession and the slow recovery.

Popular exchange-traded funds (or ETFs) like the SPDR S&P 500 ETF (SPY), the iShares Core S&P 500 ETF (IVV), and the iShares S&P 100 ETF (OEF), which track large-cap equities of companies like Apple Inc. (AAPL) and Exxon Mobil Corp. (XOM), are a good barometer to judge whether the Fed’s policies are having the desired effect in the economy. These ETFs generally do well if the economy is strengthening.

Yellen went on to express her views on the state of the recovery after the Great Recession of 2009. Find out more in the next part of this series.


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