Yesterday, Chairwoman Janet Yellen presented the Federal Reserve’s Semiannual Monetary Policy Report to the Congressional Committee on Banking, Housing, and Urban Affairs. While the financial markets were closely focused on clues as to the future direction of monetary policy and rate hikes (see “Analyzing Impact Of Fed Rate Hikes), I wanted to address her comments regarding the current employment situation and outlook.
“In the labor market, gains in total nonfarm payroll employment averaged about 230,000 per month over the first half of this year, a somewhat stronger pace than in 2013 and enough to bring the total increase in jobs during the economic recovery thus far to more than 9 million. The unemployment rate has fallen nearly 1-1/2 percentage points over the past year and stood at 6.1 percent in June, down about 4 percentage points from its peak. Broader measures of labor utilization have also registered notable improvements over the past year.”
While it is an accurate statement that the U-3 unemployment rate, as reported by the BLS, has dropped to 6.1% as of the latest report there is much controversy surrounding the validity of that statement.  (For more on this read: What Is The Real Unemployment Rate?”)
However, when it comes to creating economic growth it is only full-time employment that matters. Full-time employment fosters higher income levels, promotes household formations and increased consumption. In an economy that is roughly 70% driven by consumption, the “quality” of employment is much more important than the “quantity.”
Therefore, the first chart below shows the ratio of those that “usually work full time” as compared to the working age population (16-54 years of age.)
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 (Note: While the latest report from the BLS showed an increase of 288,000 jobs in June, the full-time employment to population DECREASED by 0.5% due to the loss of 580,000 full-time jobs.)
