Philadelphia Fed on Labor Market – Significant progress has been made

Last week’s employment numbers showed employers adding 214,000 jobs in October. Revisions for September and August added 31,000 more jobs than originally estimated. Interestingly, what we once thought was a weak jobs report for August now shows we added 203,000 jobs, which means that we have had nine months of job growth above 200,000 for the first time in nearly 20 years. In all, employers have added more than 2.3 million jobs thus far in 2014, at an average pace of 229,000 per month through October.

The unemployment rate in October was 5.8 percent, well below the 6.7 percent we experienced in December 2013. Whereas the headline U3 measure fell 0.9 percentage points since December 2013, the broader U6 measure, which includes discouraged workers and involuntary part-time workers, dropped 1.6 points, from 13.1 percent to 11.5 percent, its lowest since September 2008.

The unemployment rate continues to fall faster than many policymakers had been forecasting. For instance, in the Summary of Economic Projections (SEP), submitted in December 2013, the central tendency of FOMC participants’ projections for the unemployment rate at the end of 2014 was 6.3 to 6.6 percent, dropping to 5.8 to 6.1 percent at the end of 2015. We have clearly exceeded these expectations. At 5.8 percent, the unemployment rate is already notably below where the Committee thought it would be at the end of 2014 and is at the low point in the range expected at the end of 2015. Thus, it is fair to say that we are at least a year ahead of where we thought we would be when we started to taper asset purchases.

This is not to claim that all is rosy in the labor markets. Many Americans remain frustrated and disappointed in their jobs and job prospects. For example, a large contingent of those working part time for economic reasons would like to be working full time. Nonetheless, we have to acknowledge that significant progress has been made.

via Speech: The U.S. Economic Outlook and Monetary Policy (November 12, 2014) – Philadelphia Fed.