Janet Yellen
made a speech on Monday at the National Interagency
Community Reinvestment Conference in Chicago, Illinois. The speech, which has
been labeled by the press as extremely dovish, focused on unemployment. Yellen
stated that she believes that there is still a significant amount of “slack” in
the job market. She defined slack a time when “significantly more people willing
and capable of filling a job than there are jobs for them to fill” and that “during
a period of little or no slack, there still may
be vacant jobs and people who want to work, but a large share of those willing
to work lack the skills or are otherwise not well suited for the jobs that are
available.”
Yellen cited the unusually high number of workers who are working part
time but would like a full time job, the fact that the decline in unemployment
has not helped raise wages, the large number of unemployed who have been out of
work for six months or more and the low participation rate as evidence for the “slack.”
In fact, Yellen stated that the 63% participation rate could actually be “overstating
the progress in the labor market.”
She went on to say that the country is experiencing cyclical unemployment
and that monetary policy is an effective tool for stretching the recovery and
creating jobs.
In a somewhat unusual move for a Chair of the Fed, Yellen
humanized the issues at hand by specifically mentioning the cases of three
individuals: Dorine Poole, Jermaine Brownlee, and Vicki Lira. All three
have lost their jobs during the recession and have not been able to find
another, and thus are “a reminder that there are real people behind the statistics."
This foray away from the standard hard
facts usually found in a speech given by Chairs of the Fed did not exactly go swimmingly,
however. As it turns out, two of the individuals cited by have criminal records
that may have been preventing them from getting jobs, muddling Yellen’s message
somewhat.
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