Fed Chairwoman Janet Yellen has expressed a desire to maintain lower interest rates for longer, even with the unemployment rate about as low as the Fed thinks it can go, to bring discouraged workers back into the job hunt and into positions. (AP Photo/Lynne Sladky, File)
Economy might need only 50,000 jobs per month, Fed bank finds
As few as 50,000 new jobs each month are needed to keep the labor market healthy, according to new research from the Federal Reserve Bank of San Francisco.
San Francisco Fed economists Rhys Bidder, Tim Mahedy and Rob Valletta published a study Monday finding that the U.S. economy needs to add only between 50,000 to 100,000 new jobs a month to keep the unemployment rate from rising.
The country has been easily clearing that mark, averaging 192,000 new jobs each month for the past three months and more than 200,000 for the past year.
The regional Fed bank's calculation is just the latest to show that the U.S. doesn't need the robust job growth it has in the past, thanks largely to slowing population growth. The analysis is based on estimates of population growth, statistics on labor force participation and a calculation of what the unemployment rate would be if the economy were fully healthy.
The upshot is that, with unemployment already as low as 5 percent, slowing monthly job growth is not necessarily cause for concern.
"Job growth can slow substantially from its recent pace and still remain at or above trend," the researchers wrote.
In past years, the economy needed closer to 200,000 jobs a month to keep up with population growth and make up for the jobs lost in the recession.
Now, however, many economists at the Federal Reserve and in the private sector think the U.S. is near "full employment," meaning that the unemployment rate cannot go much lower than the current 5 percent without creating imbalances.
With each month that job gains are above trend, the number of unemployed workers should be reduced.
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In 2014, researchers at the Federal Reserve Bank of Chicago calculated that the entire jobs gap would be eliminated by the end of 2016 if monthly job gains averaged 170,000. Over the long run, they also estimated, only 50,000 jobs monthly are needed to keep the unemployment rate steady.
Fed Chairwoman Janet Yellen has expressed a desire to maintain lower interest rates for longer, even with the unemployment rate about as low as the Fed thinks it can go, to bring discouraged workers back into the job hunt and into positions.
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