Yellen used an appearance at an event sponsored by the Chicago regional Fed bank to push back against the idea that today's high unemployment is the result of structural forces the Fed cannot address with monetary policy. Rather, she argued, the weak labor market is the result of "slack" in the economy that the Fed can counteract.
"In some ways, the job market is tougher now than in any recession," said Yellen, citing the historically high share of the long-term unemployed. Although the unemployment rate has fallen to 6.7 percent, the share of the unemployed who have been out of work for 27 weeks or long makes up nearly 40 percent of the jobless, or 3.8 million Americans.
Those workers' struggles are not their own fault, Yellen suggested. Instead, the larger problem is that the broader economy is not creating jobs. "It might seem obvious, but [what is] needed to help people find jobs ... is jobs. No amount of training will be enough if there are not enough jobs to fill," she said.
She then laid out her evidence that the problem was slack in the labor market, not that “people who desire to work lack the skills that employers are demanding."
Her evidence consisted of six points:
1. The number of people who are working part time but would like full-time work, at 7.2 million, remains high (it was as low as 4 million before the recession).
2. Hiring remains slow. Monthly hires have risen to about 4.5 million in recent months, but that remains well below the 5 million-plus that prevailed before the financial crisis.
3. Few workers are quitting their jobs. The number of workers who feel confident enough in the labor market to voluntarily leave their jobs remains depressed.
4. Slow wage growth. "Labor compensation has increased an average of only a little more than 2 percent per year since the recession, which is very low by historical standards," Yellen said.
5. The high share of long-term unemployment.
6. The depressed labor force participation rate. At 63 percent in February, the labor force participation rate — the proportion of U.S. adults who said they had or wanted jobs — was near the lowest level it had been since the late 1970s.
Those factors indicate that an "extraordinary commitment" is still needed from the Fed, Yellen said.
That commitment takes the form of the Fed's monthly quantitative easing program (currently being slowed) and continued low interest rates.
Those measures are undertaken ultimately for the sake of the unemployed, Yellen clarified. "Although we work through financial markets, our goal is to help Main Street, not Wall Street," she said. During her speech, she identified specific individuals harmed by the recession whom the central bank's actions are meant to help.