On the other hand, Vitner noted, employers are not adding a lot of jobs, especially better-paying ones.
“If you’re looking for a job, things haven’t improved that much,” he said. “But if you have a job, you feel a little better about the economy.”
The nation’s aging population has led in part to the declining labor participation, but the economy also isn’t creating a lot of good-paying jobs to draw people into the job market. And when jobless people are not actively searching for work, they’re not counted by the government as unemployed.
Fed Chairman Ben Bernanke has said the jobless rate seemed to understate the extent of the weakness in the labor market. On Friday another top Fed official, who is a voting member of the policy-making committee, suggested this ambiguous nature in the jobs report.
The employment question for the Fed in deciding when to taper its bond buying was whether it should focus primarily on payroll job growth and the unemployment rate or also look at broader indicators, such as the labor force participation rate, said James Bullard, president of the Federal Reserve Bank of St. Louis.
“If the former, then labor markets have clearly improved since September 2012,” Bullard said in remarks at a conference in Boston. “If the latter, then labor markets may be judged to remain weak, but the criterion for labor market improvement would be considerably muddied.”
With many workers feeling more confident, consumer spending has continued to increase. Car sales are strong, the housing market is recovering, and more people are frequenting restaurants and stores, all of which have helped drive job growth.
The problem is that more of the new jobs in recent months have been in typically low-wage sectors.
Since the start of the year, about half have been in retail, temporary-help and the hotel-restaurant-leisure industries — all of which offer significantly less pay and hours on average. In the first seven months last year, these three industries accounted for less than 30 percent of the new jobs added.