Modest wage growth means that the economy could add many more jobs before reaching full strength, Federal Reserve Chairman Jerome Powell said Friday afternoon in remarks that could have implications for how the central bank manages the money supply in the months ahead.
“The absence of a sharper acceleration in wages suggests that the labor market is not excessively tight,” Powell said in a speech at the Economic Club of Chicago.
The monthly jobs report released Friday morning showed the economy still adding jobs at a high rate but wages growing at a modest 2.7 percent annual rate.
A range of other economic indicators, starting with the low unemployment rate of 4.1 percent, would normally suggest to the Fed that the economy is near full employment and that the central bank would risk runaway inflation if it didn’t move to tighten monetary policy.
Powell acknowledged those statistics, too, and concluded that the central bank is “uncertain” whether the economy is at full employment. In the end, he suggested that the best path would be to continue slowly raising the Fed’s interest rate target.
In Friday’s speech, Powell also addressed the long-running slowdown in economic growth. One problem unique to the U.S. is that labor force participation has been hurt by people falling out of the workforce to join disability rolls or because of opioid addiction, he said.
