Fed's Daly: It's Not Easy to Convey the View that an "Economy with Zero Job Growth Is Consistent with Full Employment"

San Francisco Fed President Mary Daly (2027 FOMC voter): As labor force growth approaches zero, monthly net job gains of "zero" or even negative may be consistent with expectations and not necessarily reflect signs of weakness.

So, what does this mean for monetary policy? First, job growth data alone may no longer be a reliable indicator of labor market strength.

Indicators and ratios such as the employment-to-population ratio, unemployment rate, quit rate, or hiring rate can more clearly demonstrate the health of the labor market because they account for changes in the size of the labor force.

Communication will become more difficult. It is not easy to convey the view that an "economy with zero job growth is consistent with Full Employment."

The ample supply and dynamic labor market that dominated recent history may be fading away. And as inflation is already above target, policymakers must be very clear about how they will make progress toward our statutory objectives (price stability and Full Employment).