Don't Expect Job Data Alone to Persuade Fed on Rates Janet L. Yellen, the incoming chairwoman of the Federal Reserve, has pointed to the proportion of the work force with part-time jobs and the long-term unemployment rate as important labor market indicators. Just over a year ago, the Federal Reserve changed its guidance on how long it planned to keep interest rates very low. The low rate, it said, would "be appropriate at least as long as the unemployment rate remains above 6.5 percent," assuming that inflation and expectations for inflation also remained low. Ben S. Bernanke, the Fed chairman, told a news conference at the time that this signaled no real change from the previous statement that the central bank expected to maintain superlow rates "at least through mid-2015." That was the case, he said on Dec. 12, 2012, because the Fed thought the unemployment rate, at 7.8 percent in the most recent report then available, would stay above 6.5 percent until at least mid-2015. Next week, Mr. Bernanke's term ends and he will be succeeded by Janet L. Yellen, the vice chairwoman. A week after that will come the January jobs report. With the December unemployment rate at 6.7 percent, it is at least possible that the 6.5 percent target will be reached then, or within a month or two after that. Inflation has remained low. In December 2012, the Federal Reserve said it would consider raising interest rates when the unemployment rate fell to 6.5 percent. That could happen when the January jobs report is released on Feb. 7 - a week after the new chairwoman, Janet Yellen, takes office. But Ms. Yellen has pointed to other labor market indicators as being important, including the proportion of the work force with part-time jobs that would prefer to be working full time, and the long-term unemployment rate - the proportion of the labor force that has been out of work for at least 15 weeks. Those indicators are still well above where they have been in the past. Percentage of labor force working part time for economic reasons Long-term unemployment rate Out of work for 15 weeks or more Average when was between 6.4 and 6.6 percent But do not expect the Fed to raise interest rates anytime soon. Since the Fed set the 6.5 percent target, the unemployment rate has been the odd man out in terms of economic statistics. It has fallen faster than the Fed, or most private forecasters, expected. But economic growth, as measured by the gross domestic product, has lagged behind those forecasts. During the last year, as the Fed grew more optimistic about the unemployment rate, it grew less optimistic about overall economic growth. Ms. Yellen has gone out of her way since then to point to a number of other labor market indicators, none of which have improved as much as the unemployment rate. The indicators she cited included the number of workers unemployed for extended periods of time. "We know that long-term unemployment is devastating to workers and their families," she said in a speech last February. The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children. She added that "long-term unemployment can make any worker progressively less employable, even after the economy strengthens." She pointed out that during the worst part of the severe recession of the early 1980s, the median time that unemployed people said they had been unemployed was 12 weeks. That figure peaked at 25 weeks - nearly six months - in 2010 and is at 17 weeks in the latest jobs report. Moreover, it has been rising since last summer as those out of work for brief periods found jobs while others did not. Indeed, the short-term unemployment rate - the proportion of the labor force out of work for less than 15 weeks - has fallen to 3.1 percent. It was higher than that before the recession. The reason the overall unemployment rate remains well above prerecession levels is that the long-term unemployment rate is at 3.6 percent and declining only slowly. Another indicator that Ms. Yellen pointed to reflects how well people with jobs are doing. That is labor's share of income in the nonfinancial corporate sector, a figure estimated by the Bureau of Labor Statistics each quarter. For decades, from 1950 through the early 2000s, labor's share rarely exceeded 66 percent and almost never fell below 61 percent. But it fell below 60 percent in 2005 and then plunged after the recession began. The last figure reported was 57.1 percent, barely above the 2011 low. Ms. Yellen appears to bring to her new job both an economist's love of statistics and a liberal's concern over those who fall behind. That was also shown in her early academic work, which focused on the labor market. Bernanke was in place when thwarting depression dynamics was job No. 1," said Robert J. Barbera, the co-director of the Center for Financial Economics at Johns Hopkins University. Yellen takes over amid some challenging issues surrounding labor markets. Given their particular areas of expertise, you have to like the handoff at this juncture," he said. Mr. Bernanke had studied the Great Depression when he was a professor. In a 1990 paper written with her husband, George A. Ackerlof, also a prominent economist, and Andrew K. Rose, Ms. Yellen pointed to data showing that people who took jobs during recessions tended to receive lower salaries than those of similar people who took jobs during expansions. That might seem obvious, but what was perhaps surprising was that those differences persisted in later years, long after the recession or recovery had ended, at least for people who did not change employers. Even when the job market improved, workers already on staff were not likely to receive raises to the levels that were needed to attract new employees. Thus, they argued, it could be perfectly rational for a worker to prefer to hold out for a better job that might be available when the economy improved, just as owners of empty new office buildings may prefer to wait for the market to improve rather than accept the depressed rents available during a recession. Some economists have pointed to the fact that some unemployed workers did not take whatever jobs were available as evidence that they preferred "leisure" over income and even concluded that such preferences argue against providing unemployment insurance because people are unemployed by choice. "Our model offers an alternative rationale for a high elasticity of labor supply with respect to transitory wage movements," the 1990 paper said, using the kind of stilted language that economists seem to expect. If the wage were rising more rapidly than the rate of time preference, a rational worker seeking long-term work would optimally wait for work, rather than commit to the best job currently available. This behavior occurs even if workers place no value at all on leisure. Ms. Yellen and Mr. Ackerlof also advanced what they called the "fair wage-effort hypothesis," saying that workers who were paid what they regarded as less than a fair wage responded by doing a poorer job. That indicates that companies that hold wages down may suffer relative to those that offer better pay and working conditions. They pointed to, among other evidence, a 1987 article in The New York Times by Agis Salpukas that reported that some companies that had instituted dual-tier pay scales were dropping them, having found the system "produced a resentful class of workers who in some cases are taking their hostility out on customers." At her confirmation hearing in November, Ms. Yellen was asked about the Fed's ability to increase jobs. She conceded there were "a multitude of things" that the Fed could not change, mentioning education and job training. "But what we can do," she added, "is try to achieve, as we are, a robust recovery so that we create jobs, we have a stronger job market. And in a stronger job market, people who are having a lot of trouble getting jobs will be drawn into jobs. They'll get better jobs. There'll be more training. People will move up job ladders and opportunities will increase. Given her concerns about such issues as long-term unemployment, don't expect a 6.5 percent unemployment rate to foreshadow any meaningful change in Fed policy in the near future.