The Federal Reserve must take a “patient approach” to withdrawing stimulus measures aimed accelerating economic growth because millions of Americans who want full-time work can only get part-time jobs, Eric S. Rosengren, president of the Federal Reserve Bank of Boston, said Wednesday.
These workers, still numbering more than 7 million almost five years after the recession ended, show that the labor market remains even weaker than the official unemployment rate, 6.6 percent in January, Rosengren said. In 2007, before the recession began, 4.6 million people had part-time jobs because they couldn’t find full-time work.
“It is vitally important that labor markets continue to improve,” Rosengren said in a speech to the Boston Economic Club at the Fed’s downtown office. The Fed should continue efforts to keep short- and long-term interest rates low, Rosengren said as way for “supporting a return to full employment.”
Economists consider a jobless rate of 5 to 5.5 percent as full-employment. Rosengren said that on its current trajectory, the nation won’t achieve that level until mid-2016.
Rosengren has been an outspoken advocate of the Fed maintaining aggressive stimulus policies. In December, he dissented from a decision by Fed policy makers to begin trimming bond purchases aimed at lowering long-term interest rates, such as mortgages.
The January unemployment rate was just above the 6.5 percent threshold set by the Federal Reserve to begin a discussion of raising short-term interest rates, which the central bank has held near zero since the end of 2008. Recently, Fed policy makers recommended keeping very low short-term rates even after the official unemployment rate falls below 6.5 percent, in part because it doesn’t reflect the weakness in the job market today.
Part-time workers who want but can’t get full-time jobs aren’t considered in that rate. Neither are workers who want to work, but have given up looking.
Many of the part-time workers seeking full-time jobs are of “prime earning age,” Rosengren said. They have the skills to work-full time, but their employers do not have the business to increase their hours. A faster growing economy could increase the demand for the goods and services of companies, leading employers to increase hours for existing workers, and eventually hire new ones.
Rosengren noted the number of part-time workers who want full-time jobs has been slowly falling for white workers. Those numbers have also declined modestly for Hispanic workers, but there has been no decline among African-Americans.
“The slow recovery has not only resulted in very elevated unemployment rates for minorities,” he said, “but also made it more difficult to move from part-time to full-time employment.”