The Federal Reserve really, really wants to raise rates again, but it has a problem. There's no reason to. Not now, and maybe not for the rest of the year either.

That, at least, is what one of Fed Chair Janet Yellen's favorite economic indicators is telling us right now. What is that? The unemployment rate? Or maybe the labor force participation rate? Or even the number of people who want full-time work but can only find part-time jobs? Yes. It's all of the above. The Fed, you see, has come up with a Labor Market Conditions Index that combines 19 different measures of, well, labor market conditions to give us a comprehensive look at the jobs situation. And that's gotten pretty ugly since the start of the year.

It's admittedly nowhere near 2008, but it doesn't have to be to still be a disaster. The index has fallen 14.9 points the past 5 months, which is just the seventh time it's been negative for that long the past 25 years. Now, the good news is that the Fed was able to help keep three of those from turning into recessions by reducing rates in response. But the bad news is that this wasn't enough to keep the other three from doing so. And maybe the worst news is that this isn't even an option today, since the Fed has neither the scope to cut rates nor the will to print money. So the result, as you can see below, is that this is the first jobs slowdown where the Fed can't or won't be able to cushion the blow. (The grey areas denote when the Fed has eased policy in the past).

This makes it almost impossible to justify increasing interest rates right now. At least if you go by the last 25 years. Indeed, every other time the Labor Markets Condition Index has turned negative for 5 months or longer, the Fed's next move has been to cut rates, not raise them. And the shortest it's waited to start hiking them after that has been 7 months. Which, even if you assume that the economic outlook brightens considerably from here on out, would mean the Fed shouldn't be thinking about increasing interest rates until December or January.

Despite all this, though, the Fed has only reluctantly ruled out raising rates in June, and probably in July too. But it's still holding out hope that it can do so in September. It's the same mistake the Fed has been making for years now, even though it's been doing its best not to make it. And that's undoing the things it's done to support the economy before the economy is strong enough to stand on its own.

I realize that isn't exactly fair when the Fed kept interest rates at zero for 7 years, but, well, nobody said managing the economy was. For all it's done, the Fed has still been looking for any excuse to stop doing it ever since the middle of 2013. And it's tried to do that—or not, as the case may be—even though Fed Chairs Ben Bernanke and Janet Yellen have both warned that doing less is riskier than doing more after a crisis like the last one. That's the price of unanimity, or close to it, when the Fed's median voter seems to have gotten uncomfortable with any more unconventional policies. They just want out, in spite of inflation still being below its 2 percent target.

But, as economist David Beckworth points out, the problem is that saying you want to do less isn't much different from actually doing less. Talking about tightening, in other words, is tightening. That's clear enough from everything that's happened the last couple of years. First, the Fed said it would cut back on its bond-buying a lot sooner than anyone expected, with the immediate result that mortgage rates shot up. Then, it said it wanted to raise rates even while the rest of the world was slashing them, which sent the dollar soaring some 20 percent. And finally, it did, in fact, raise rates last December—just 0.25 percentage points—before announcing that it hoped to do so four more times this year, sending borrowing costs up even more. Add it all up, the mere prospect of rate hikes has been enough to send rates and the dollar up as if they had already been hiked three times or so. The Fed wouldn't like to admit it, but that's probably a big part of why the labor market has slowed so much.

The only thing worse than zero interest rates is having zero recovery.