Federal Reserve Chair Janet Yellen, right, and European Central Bank President Mario Draghi walk together during the Jackson Hole Economic Policy Symposium at the Jackson Lake Lodge in Grand Teton National Park near Jackson, Wyoming. (John Locher/AP)
August 26

THE FEDERAL Reserve has taken a consistent position on the “extraordinary measures” it has employed to salvage the stricken U.S. economy: Any withdrawal of the Fed’s support will depend upon progress in the labor market. Continuing policies bequeathed by her predecessor, Ben S. Bernanke, Fed chair Janet Yellen has responded to the downward drift in the unemployment rate by gradually winding down the Fed’s bond purchases, also known as “quantitative easing”; they are scheduled to end in October. And the Fed is still expected to raise short-term interest rates — which it has held near 0 percent for almost six years — by mid-2015.

There’s just one catch: The central bank no longer seems to understand what’s happening in a labor market still reeling from not only an epic recession but also record long-term unemployment, aging and other demographic change. At the Fed’s annual Jackson Hole, Wyo., conference last week, Ms. Yellen explained that there was still more “slack” in the economy than the headline unemployment number might suggest. Indeed, Mr. Bernanke said in December 2012 that the Fed might raise rates when the unemployment rate hit 6.5 percent; yet unemployment has fallen to 6.2 percent under Ms. Yellen, with job growth of more than 200,000 per month, and interest rates still haven’t budged. At the same time, Ms. Yellen acknowledged that slow wage growth might not be a sign of labor market weakness, as she previously had supposed, but rather “a misleading signal.”

Ms. Yellen’s bottom line was even-handed, bordering on vague: The Fed, she said, will watch “a wide range of variables and will require difficult judgments about the cyclical and structural influences in the labor market.” Such assessments, she observed, are “always . . . imprecise” and are “especially challenging in the aftermath of the Great Recession.”

It was, in short, a plea for patience and an apology for improvisation. Small wonder that monetary hawks are circling, calling for Ms. Yellen to accelerate an interest-rate hike lest inflation get out of control. Undoubtedly, there have been trade-offs in the prolonged zero-interest policy; whatever economic stimulus it has achieved has come at the expense of savers in particular and a distortion in the pricing of assets generally. The hawks are right to say the Fed should act well before its policy reaches the point of diminishing returns.

What they’re not necessarily right about is whether we have already reached that point. The uncertainties clouding Ms. Yellen’s crystal ball cloud those of the hawks as well. Inflation remains low, as do measurements of inflationary expectations, while the pain of elevated joblessness remains palpable. Often forgotten in the debate over when to raise interest rates is the fact that, in practical terms, it probably involves no more than a few months sooner or later. The Fed can’t keep its options open forever, but it still has ample time to study them.