Federal Reserve's Daly: The "Rule of Thumb" in the labor market is being rewritten Zero employment growth does not necessarily indicate weakness

Ask AI · How do changes in immigration policies reshape labor market assessment standards?

Cailian Press, April 4th (Editor: Zhou Ziyi) On Friday (April 4th), the U.S. March non-farm employment data was released, and the U.S. Bureau of Labor Statistics disclosed a report that was overall better than previous forecasts.

The report shows that non-farm employment increased by 178k in March, compared to an expected increase of 65k. This figure rebounded from the revised decrease of 133k in February and approached the record of 160k new jobs created in January; the unemployment rate fell to 4.3%, versus the forecast of 4.4%.

That day, San Francisco Federal Reserve Chair Mary Daly stated that the U.S. economy no longer needs to create as many jobs as before to maintain the population employment ratio. She pointed out that adjustments in government policies have led to a decrease in immigration, causing labor force growth to approach zero, which means the traditional “rule of thumb” used to measure labor market health is changing.

She believes that in this environment, monthly hiring data no longer accurately reflect the health of the labor market; zero employment growth can still be considered normal, and the unemployment rate may be a better indicator.

Federal Reserve Board member Chris Waller recently also noted that employment growth could be zero, and due to changes in immigration policies, the labor market is not expected to grow this year. Therefore, the unemployment rate may remain stable, and the labor market can still be viewed as balanced.

Looking ahead, Daly believes that relying solely on employment growth as an indicator is unlikely to be a good standard for assessing the health of the employment market. She prefers to use indicators such as the employment-to-population ratio, unemployment rate, resignation rate, and hiring rate, as she believes these can reflect changes in the labor force size and more accurately depict the state of the labor market.

Additionally, Daly also stated that even when various confidence indices are low, data shows no signs of deterioration in the labor market, which is “very reassuring.”

She added, “This gives us more time to balance risks, and the current level of monetary policy is just right for this work.”

(Cailian Press, Zhou Ziyi)