The soft wage growth in April has given the Federal Reserve the green light to move more slowly on raising interest rates, former Fed Vice Chairman Alan Blinder told CNBC on Friday.
Blinder, who was Fed vice chairman from 1994 to 1996, spoke after the Labor Department’s jobs report showed wage growth grew slightly below recent trends in April as the pace of hiring picked up and unemployment fell.
“It gives the Fed a green light to go slow. Everybody is emphasizing that the Fed is going up in rates, which of course they are. But they’re going very slowly. There’s no panic, there’s no sense that we have to clang the bells because inflation is on the horizon,” he said on “Squawk on the Street.”
The Labor Department report said wages grew 7 cents an hour to an annualized pace of 2.5 percent, though the rate of raises has slowed since December.
Wage growth not accelerating as quickly as people would expect suggests the labor market is not quite as tight as we think at 4.4 percent unemployment, Blinder said.
“Which is another way of saying, maybe we could push lower,” he said.
“What we may be missing is that we’re not yet to the point where employers have to go out with a vacuum cleaner, trying to scoop up labor wherever they can find it,” he said. “It’s not quite that tight yet. … There’s probably more hiring to be done.”
On Friday, the Labor Department said nonfarm payrolls grew by 211,000 in April, while the unemployment rate fell to 4.4 percent, its lowest since May 2007, two days after the Fed decided to hold interest rates steady at its May meeting.
Some economists expect April’s surprise drop in unemployment means that the Fed is on track to raise interest rates at its June meeting.
— CNBC’s Jeff Cox contributed to this report.