Fed leaders say reflects a sustainable level over the long

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Reference no: EM13737573

The biggest decision that Janet Yellen has faced in her year-old Federal Reserve chairmanship was laid bare in a single report on the domestic job market released Friday.
The unemployment rate fell to 5.5 percent as job creation continued at a strong pace. Joblessness is now within the 5.2 to 5.5 percent range that Fed leaders say reflects a sustainable level over the long run.
For a Fed that has spent the last seven years doing everything it can think of to try to get the job market on track, that translates to: Mission Accomplished. And by traditional central bank thinking, that would mean it's waited long enough to raise interest rates to prevent the economy from overheating.
But by other measures in the same report, overheating is a distant worry. Average hourly earnings rose only 0.1 percent, and have now risen less than 2 percent over the last year - pretty much what they've been doing for five years straight. The number of people in the labor force actually declined, suggesting that the pool of potential workers who neither have a job nor are looking for one is growing, not shrinking.
All of that points to a job market that still has a great deal of room to run before the Yellen Fed needs to do much of anything."
More recently (5 May 2015), it was reported that GDP may actually have fallen in the first quarter of 2015.

Taking into account what you now know about monetary and fiscal policy, as well as the trade-off between unemployment and inflation:

What is your advice to Janet Yellen. Why? Explain

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Reference no: EM13737573

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