U.S. jobs progress still far short of Fed’s ‘substantial’ tripwire

The U.S. job market may have picked up steam in March, but the improvement was only a small step towards the Federal Reserve’s threshold for considering reining in its massive support for the economy.

That’s the signal from a broad index of labor market indicators developed by Cornerstone Macro economist Roberto Perli and which includes an array of statistics U.S. central bank officials have placed at the center of their analysis of the economy.

Perli’s index, using data since 1990, improved following the addition of nearly a million jobs to U.S. payrolls in March.

Nevertheless, the unemployment rate at 6% is more than 1.5 times above the low levels reached early last year. Other factors policymakers consider important in their analysis of the job market are even farther from their strongest readings.

The employment-to-population ratio, at 57.8%, is nearly 7 percentage points short of its peak reading of 64.7% in April 2000 and more than 3 points below where it was before the COVID-19 pandemic, representing about 8 million adults not in jobs.

That’s unlikely to represent the “substantial further progress” towards labour market repair that the Fed has said must occur before it considers paring back its $120 billion in monthly bond purchases and, after that process is complete, discusses raising interest rates.

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