WASHINGTON (AP) — With employers ramping up hiring and the unemployment rate sinking in the past year, pressure is rising on Janet Yellen's Federal Reserve: Is the time near to raise interest rates to prevent a strengthening economy from igniting inflation?
The easy answer might be yes. Employers, after all, have added an average 244,000 jobs a month since February — the best six-month hiring spree in eight years. And at 6.2 percent, the unemployment rate is just above the 6.1 percent average for the past seven decades.
But Yellen has made clear she monitors many gauges of the job market beyond hiring and unemployment. And those other indicators point mostly in one direction: The job market still isn't at full health.
The timing of the Fed's first rate increase is a high-risk decision — one that's put global stock and bond investors on nervous alert. If the Fed raises the short-term rate it controls too soon, it could derail the U.S. economy's gains. If it raises it too late, growth could overheat and inflation could surge.
Even if the Fed gets the timing right, higher rates will mean higher borrowing costs for homes, cars and other loans. The stock market could sink, too. The Fed's benchmark rate has been near zero since December 2008.
A close look at Yellen's self-described "dashboard" and what it's signifying about the job market:
Despite a step-up in job gains this year, most Americans have received little or no meaningful pay raise. Average hourly earnings ticked up a penny in July, the government said Friday, and are just 2 percent higher than a year ago — less than the rate of inflation. Hourly pay typically rises 3 percent to 4 percent in a healthy economy, Yellen noted in March. That's because when the unemployment rate is low, businesses usually must pay more to attract workers. Many economists say the unemployment rate will need to fall below 5.5 percent before wages will rise broadly and significantly.
Roughly 7.5 million Americans are working part time but would prefer full-time jobs. That figure is down from a peak of 9.2 million in 2010. But it's still up substantially from about 4.5 million in December 2007, when the recession officially began. Because these workers have jobs, they aren't counted as unemployed. But they're still people who want to work more. And when this figure is elevated, it suggests that businesses are still cautious about hiring. Consider Ronee Hinton, 23, of Laurel, Maryland, who has worked part time at Wal-Mart for two years even though she's desperate for full-time work. She makes $8.40 an hour. Her paycheck barely covers rent. "You have nothing extra for anything," she said.
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