Recent job gains an important development, Fed's Dudley says

Middle-wage jobs have outnumbered higher and lower wage jobs in the US, the head of the New York Federal Reserve Bank said on Thursday, while warning that Puerto Rico’s current level of public debt was “unsustainable”.

In a speech at the Federal Reserve Bank of New York, president and chief executive William C. Dudley said US labour “market conditions continue to improve” as over 2.4m jobs were added over the past year.

He said for the first time in a while middle wage jobs such as teachers, construction workers, mechanics, administrative support and truck drivers were added to the market, which had disappeared during the Great Recession in the late 2000s and early 2010s.

Dudley said: “I believe this is an important development in the economy, because, if it were to continue, it would create more opportunities for workers and their families who have been struggling up to now."

He also warned that the commonwealth of Puerto Rico, a US territory, was continuing to “struggle under the weight of economic stagnation, employment declines and outmigration”.

“Puerto Rico slipped into recession in 2006, and a decade later a recovery has yet to materialise. Any fixed level of debt will grow even more burdensome if the economy is shrinking. Consequently, this long deep recession has exacerbated the island’s fiscal woes.”

Outgoing migration for the region was an important concern and it is both a cause and effect of the economic decline. There is brain-drain of labour from the island as those who remain cause headwinds for growth due to low labour force participation, an ageing population and poor preparation for skilled jobs.

As the US labour market showed gradual improvement, Dudley maintained that his views had not changed since Tuesday, when he told Fox News that the US Federal Reserve could raise interest rates in September.

Dudley said on Tuesday: “We’re edging closer towards the point in time where it will be appropriate, I think, to raise interest rates further.

“The market is complacent about the need for gradually snugging up short-term interest rates over the next year or so. We are looking for growth in the second half of the year that will be stronger than the first half. I think the labour market is going to continue to tighten, and in that environment I think we are getting closer to the day where we are going to have to snug up interest rates a little bit.”