Yellen: More than 2 years until full employment reached

The three big questions for the FOMC, says Janet Yellen are 1) Is there still significant slack in the labor market 2) Is inflation moving back toward 2% 3) What factors may push the recovery off track?

Full speech

As for labor, the Fed's baseline projection is more than another two years until full employment (defined as headline UE of 5.2-5.6%) is reached. She notes wage pressures are a good signal of a tightening labor market and signs of acceleration are difficult to find.

Addressing the FOMC's dropping of guidance being steered by the headline UE rate, Yellen says it may have changed, but the goal of guidance - that the FOMC will maintain ZIRP for some time - hasn't. "Decisions about liftoff (in the Fed Funds rate) should not be based on any one indicator, but that it will take into account a wide range of information on the labor market, inflation, and financial developments."

Comments (11)
  • wyostocks
    , contributor
    Comments (9119) | Send Message
    But they'll continue their stupid policies forever.


    What that definition of stupidity again?
    16 Apr 2014, 12:43 PM Reply Like
  • tom_t
    , contributor
    Comments (323) | Send Message
    Hey, if another million people permanently drop out of the labor force, we could be at "full employment" before you know it.
    16 Apr 2014, 12:49 PM Reply Like
  • bbro
    , contributor
    Comments (11240) | Send Message
    Follow the deposits to loans ratio
    16 Apr 2014, 12:50 PM Reply Like
  • fuzzymc
    , contributor
    Comments (198) | Send Message
    Full employment is ancient history and not to be repeated anytime soon!!
    16 Apr 2014, 01:00 PM Reply Like
  • Captain Pike
    , contributor
    Comments (890) | Send Message
    Tom_T and fuzzy got it right. It would take a lot longer than 2 years, even at a real good clip 250K+/month, to get to REAL full employment as so many millions have dropped out.


    Their current policy is good under the new economic realities, but would end sooner by way of shrinking deficits if we just had a real prez and speaker!
    16 Apr 2014, 01:52 PM Reply Like
  • James Bjorkman
    , contributor
    Comments (2778) | Send Message
    They are stuck - they dread inflation because it will make the deficit skyrocket. So, they continue the same failed policies that have the economy limping along for the last five years. A bold move would be to allow interest rates to rise, their terror about inflation is strangling the economy.
    16 Apr 2014, 02:05 PM Reply Like
  • Captain Pike
    , contributor
    Comments (890) | Send Message
    Wow Dude,


    were did you learn that. If "they dreaded inflation", they would raise rates. BUT there is NO inflation, because energy is stable and plentiful. Rising interest rates kill inflation because they kill economic activity. It's adding a cost to the system. Business activity slows as a result. The economy does not need to be slowed.


    You have it arse backwards. It would not be bold it would be stoopid in the extreme.
    16 Apr 2014, 10:54 PM Reply Like
  • mobyss
    , contributor
    Comments (2653) | Send Message
    Whatever. In two years she'll be saying that full employment is just another year or two away, and then she'll do the same things (for seven years at that point) that haven't worked up until now.


    "Yellen says it may have changed, but the goal of guidance - that the FOMC will maintain ZIRP for some time - hasn't"


    They'll ZIRP for 20 years, just like Japan. Heck, we're already almost a third of the way there.
    16 Apr 2014, 02:18 PM Reply Like
  • minecanary
    , contributor
    Comments (1413) | Send Message
    As long as politicians get large sums of dough from the banks, and the banks run the FED, the rest of us can just bend over and say thank you.
    16 Apr 2014, 03:25 PM Reply Like
  • Guardian3981
    , contributor
    Comments (2544) | Send Message
    Minimum wage hikes should not even be discussed until the unemployment also reaches full...
    16 Apr 2014, 04:05 PM Reply Like
  • mandydrew
    , contributor
    Comments (193) | Send Message
    In order for there to be full employment, the amount of existing employee churn must be massive caused by vastly increasing wages (high inflation). Employers would then compromise their wish to have experienced staff and be ready to employ inexperienced staff at a lower rate and provide the necessary training. High inflation might be a phenomenon in emerging markets. The very policy of preventing a natural corrective deflation in developing markets and having a controlled level of inflation around 2% prevents the economic dynamism ("creative destruction") for full employment in developed markets. So dream on.
    16 Apr 2014, 10:32 PM Reply Like
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