Bullard: Jobless Rate Still Worthy Indicator

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Despite its decline as a result of labor for participation drops, the unemployment rate "remains as good an indicator of overall labor market health as it has been historically," Federal Reserve Bank of St. Louis President and CEO James Bullard said Wednesday.

"[E]mpirical models of the hump-shaped trend in the U.S. labor force participation rate do a good job of explaining the data," Bullard told the Exchequer Club in Washington, D.C., according to prepared text released by the Fed. The models indicate "the current participation rate is not far from the predicted trend. This means, in turn, that the cyclical component in labor force participation is likely to be relatively small. To the extent these models are correct, then the observed unemployment rate remains as good an indicator of overall labor market health as it has been historically. In particular, the recent, relatively rapid declines in unemployment can be understood as representing an improving labor market. This is the judgment that should inform monetary policy going forward."

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