Fed chair says unemployment rate is not sufficient to measure economy

WASHINGTON – Federal Reserve Chair Janet Yellen says the U.S. economy is “not close to full employment,” even as the unemployment rate has dropped a full percentage point over the past 12 months to 6.7 per cent.

The Fed downplayed the importance of the unemployment rate as a sign of the economy’s health. Fed officials ended their two-day meeting having eliminated a previous commitment to consider raising short-term interest rates once the unemployment rate fell below 6.5 per cent. The Fed will assess other measures of the economy as well.

The unemployment rate has fallen despite sluggish growth of 1.9 per cent last year, in part because many people have stopped looking for work. Once people stop seeking a job, they’re no longer counted as unemployed, and the unemployment rate can fall as a result.