Fed's Lockhart: Jobs Report No Reason to Raise Rates Sooner

Federal Reserve Bank of Atlanta President Dennis Lockhart said Friday’s strong jobs report is no reason to speed up the timing of an interest-rate increase that he sees occurring in the middle of the year or later.

“I don’t see a reason yet to accelerate my assumption of when a policy move might be appropriate,” Lockhart, who votes on monetary policy this year, said in a telephone interview from Atlanta. At the same time, “clearly this added to accumulated progress with very healthy numbers.”

Employment rose more than forecast in December, and the jobless rate declined to 5.6 percent, capping the best year for the labor market since 1999, a Labor Department report showed. The Fed last month said it would be “patient” in raising rates from close to zero, with Chair Janet Yellen saying an increase was unlikely before late April.

“The report confirms my sense of how the economy is progressing,” said Lockhart, 67, who has been a consistent supporter of record stimulus. “If the committee is to err on the side of being a little late as viewed by history writers or maybe a little early, I prefer to take the risk of being a little bit late.”

A lack of wage growth suggests slack remains in the labor market, Lockhart said.

“All the wage measures remain well below historical norms, and I think I would have to say they are not consistent yet with particularly tight labor markets,” he said.

Earnings Figures

He called a monthly decline in average hourly earnings in December “potentially noise” and inconsistent with other data on compensation.

Average hourly earnings for all employees dropped by 0.2 percent in December from the prior month, the biggest decline since comparable records began in 2006, today’s Labor Department report showed. Earnings increased 1.7 percent over the 12 months ended in December, the smallest gain since October 2012.

“We are still waiting to see the kind of strengthening of wage numbers we would expect to be consistent with what we are seeing elsewhere in terms of growth and the absolute jobs numbers,” Lockhart said.

Lockhart said the jobless rate needs to be viewed in the context of other indicators. Even if it falls below 5.6 percent, “there will still be slack,” he said.

Unemployment in December fell from 5.8 percent the prior month. The decline brings it close to the top of the 5.2 percent to 5.5 percent range most policy makers consider full employment.

Lockhart said labor-force participation appears to be “stabilizing or bottoming out.”

The participation rate, which measures the share of working-age people in the labor force, decreased to 62.7 percent from 62.9 percent.

A former Georgetown University professor, Lockhart has led the Atlanta Fed since 2007. His district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi and Tennessee.