Fed’s Daley Says Fed Should Focus on Employment Rate Over Job Counts

San Francisco Federal Reserve President Mary Daly has argued that policymakers should pay closer attention to the employment rate than to headline job-creation totals when assessing labor-market health, a framing that could reshape how investors interpret upcoming economic data and Fed rate decisions.

The remarks, reported initially by Reuters, come as the March 2026 jobs report showed nonfarm payrolls rising by 178,000 while the unemployment rate held largely steady. That combination illustrates exactly the tension Daly highlighted: a payroll number that looks solid on the surface can mask deeper signals in rate-based labor indicators.

What Daly Meant by Prioritizing the Employment Rate

The employment rate, often expressed through the employment-population ratio, measures the share of working-age adults who actually hold jobs. Unlike the monthly payroll figure, which counts how many positions the economy added, the employment rate captures whether a broader slice of the population is participating in work.

Daly’s point is that these two metrics can tell different stories. A strong payroll gain can coexist with a stagnant or declining employment-population ratio if labor force participation is shrinking, meaning fewer people are even looking for work.

The Bureau of Labor Statistics reported that the March 2026 employment-population ratio stood at 59.2%, little changed on the month, while labor force participation held at 61.9%. Those flat readings suggest the labor market is not pulling new workers in, even as payrolls grow.

+178,000 jobs

The March unemployment rate changed little at 4.3%, according to the BLS. That stability, however, obscures a notable deterioration beneath the headline: the number of people marginally attached to the labor force increased by 325,000 to 1.9 million, while discouraged workers rose by 144,000 to 510,000.

4.3%

This is Daly’s core argument in practice. Headline payrolls rose, the unemployment rate barely moved, yet the ranks of people who have stopped looking for work swelled considerably. A policymaker focused only on job counts would see strength; one watching the employment rate and participation data would see growing slack.

Why This Metric Matters for the Fed’s Policy View

The Federal Reserve operates under a dual mandate: maximum employment and price stability. How officials define “maximum employment” directly shapes whether they lean toward cutting, holding, or raising interest rates.

If the Fed reads the labor market primarily through monthly payroll additions, a figure like +178,000 suggests the economy needs no additional support. But if the employment rate and participation measures are the preferred lens, the flat 59.2% employment-population ratio and the surge in discouraged workers point to hidden weakness.

The San Francisco Fed’s own research supports this reading. A January 2026 FedViews analysis found that monthly job growth slowed to a near halt in the second half of 2025, averaging just 15,000 per month. Yet unemployment rose only modestly, from 4.2% in April 2025 to 4.4% in December 2025, because labor supply and labor demand slowed in tandem.

That same SF Fed report estimated the typical breakeven pace needed to keep the unemployment rate unchanged at roughly 70,000 to 90,000 jobs per month. Daly separately told CNBC that the two-month average jobs gain was below the roughly 30,000 jobs per month she estimates are needed to keep the unemployment rate steady, a lower threshold reflecting updated demographic assumptions.

In February 2026, the San Francisco Fed’s official communications noted that Daly viewed risks to price stability and maximum employment as relatively balanced but saw vulnerabilities tilted toward the labor market. That language is notable: it suggests Daly sees employment risk as the more pressing concern, not inflation.

The signal reads as moderately dovish, though not as an outright call for immediate rate cuts. Daly is making a methodological argument, that the Fed’s assessment tools should shift, which implies policy conclusions could follow if the data cooperates. Markets that have been repricing Fed rate cut expectations for 2026 may need to incorporate this broader labor-market lens.

How Markets Could Read Daly’s Comments

Fed communication frequently moves rate expectations, and rate expectations move asset prices. If Daly’s employment-rate framing gains traction among other FOMC members, it could shift the market’s calculus on when the next rate cut arrives.

A Fed that focuses on headline payrolls sees a labor market adding 178,000 jobs and has little reason to ease. A Fed that focuses on the employment rate sees a 59.2% employment-population ratio that has barely budged, a rising pool of discouraged workers, and a case for maintaining or increasing accommodation.

Jason Pride, whose analysis was cited in Reuters market coverage, noted that “rather than finding jobs, many were either discouraged or had become marginally attached to the labor force,” a reading that aligns directly with Daly’s argument for looking beyond the payroll headline.

For Treasury markets, a dovish labor-market interpretation would push yields lower, making risk assets relatively more attractive. For equities, the implication is supportive, as easier monetary conditions lift valuations.

For Bitcoin and the broader crypto market, the transmission mechanism runs through real interest rates and dollar strength. Lower rate expectations weaken the dollar and reduce the opportunity cost of holding non-yielding assets like BTC. Traders watching BTC funding rates and institutional flows would likely view a dovish Fed shift as a tailwind for crypto risk appetite.

However, one official’s remarks do not make consensus. Daly is one of 19 FOMC participants, and the committee’s median view may not yet reflect her emphasis on employment-rate metrics. Analysts who have warned about stagflationary risks pushing the Fed toward rate hikes represent the opposing camp, where inflation concerns dominate the labor picture.

What to Watch in Upcoming Labor Data

If Daly’s framing gains influence, the employment-population ratio becomes a critical watch metric in every monthly BLS release. The March reading of 59.2% is well below pre-pandemic levels and has shown no meaningful upward trend in recent months.

Labor force participation at 61.9% tells a similar story. If participation continues to stagnate while payrolls grow, it would reinforce the argument that headline job creation is overstating actual labor-market improvement.

The marginally attached and discouraged worker figures deserve particular attention. The March jump of 325,000 in the marginally attached population and 144,000 in discouraged workers represents a sharp one-month deterioration that could signal a turning point if it persists into April and May data.

Investors should also monitor the gap between the SF Fed’s breakeven estimates and actual payroll growth. The SF Fed’s research places the breakeven pace at 70,000 to 90,000 jobs per month, while Daly’s own cited figure is approximately 30,000. If actual payroll growth falls between or below these thresholds, the case for viewing the employment rate as the more informative signal strengthens considerably.

The next BLS employment situation report will either confirm or complicate this narrative. A strong payroll number paired with a flat or declining employment-population ratio would be the exact scenario that validates Daly’s call for a metric shift.

FAQ About Daly’s Employment Rate Comments

What is the employment rate?

The employment rate, typically measured by the employment-population ratio, is the percentage of working-age civilians who are employed. Unlike the unemployment rate, which only counts people actively seeking work, the employment-population ratio captures the full picture of how many adults actually have jobs. In March 2026, it stood at 59.2%.

Why would the Fed care more about the employment rate than job counts?

Monthly payroll numbers measure net new positions but miss people who have stopped looking for work entirely. The employment rate captures that missing population. When labor supply and demand slow together, as the SF Fed documented in the second half of 2025, the unemployment rate can stay stable even as fewer people are working relative to the total population.

Does Daly’s comment change the outlook for markets or crypto immediately?

Not directly. Daly is one voice on a 19-member committee. Her remarks signal a methodological preference, not an imminent policy change. However, if other FOMC officials adopt similar language, it would suggest the committee is seeing more labor-market weakness than the headline data implies, which would be broadly supportive of rate cuts and, by extension, risk assets including crypto.

Is the headline quote confirmed verbatim?

According to available sources, the exact phrasing that “the Fed should focus on the employment rate rather than the number of jobs” appears to be a paraphrase of Daly’s broader labor-market argument rather than a direct quotation from an official transcript. The substance of the remark is well-supported by her public statements and the SF Fed’s published research.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.