Labor market continues to improve: SF Fed President Williams

June 19, 2015

San Francisco, California – The labor market has shown “continued, solid improvement,” said John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco. “Not only has there been strong job growth, but the data show most of those new jobs are full-time and higher paying.”

Williams gave his forecast at a research conference hosted by the San Francisco Fed. He was upbeat about prospects for the U.S. labor market, predicting it would reach his 5.2 percent estimation of the natural rate of unemployment by the end of the year. He also noted the positive upward movement in wages. “Now that wage growth is starting to take off across multiple measures, it further confirms that the labor market is nearly healed,” he said. “In fact, what’s really been missing in this recovery is wage growth that’s around 3 or 3½ percent. That’s the rate I’d expect in a fully functioning economy with a 2 percent inflation rate.”

He noted that the pace of rebounding had slowed, which is to be expected in an economy nearing full health. “When unemployment was at its 10 percent peak during the height of the Great Recession, and as it struggled to come down during the recovery, we needed a fast pace of decline,” he said. “Then, we needed to create lots of jobs to get the economy back on track; now, we’re near the end zone, and there are fewer yards to go.”

Williams also addressed reports of weak first-quarter growth, citing research by the SF Fed. Using a different metric to account for seasonal factors, that research put Q1 GDP growth at about 1.5 percent, much better than had been reported.

He was, however, circumspect about inflation, saying that while he still expects it to move back towards the Fed’s 2 percent target over the next few years, he is still in “wait-and-see” mode until more data support his forecast. Nonetheless, Williams said, “I still believe this will be the year for liftoff.”

Matthew Schiffgens
Federal Reserve Bank of San Francisco
(415) 974-3246

The Federal Reserve Bank of San Francisco, with branch offices in Los Angeles, Seattle, Salt Lake City, and Portland, and a cash processing office in Phoenix, provides wholesale banking services to financial institutions throughout the nine western states. As the nation’s central bank, the Federal Reserve System formulates monetary policy, serves as a bank regulator, administers certain consumer protection laws, and is fiscal agent for the U.S. government. Follow us on Twitter at