The Federal Reserve better not rush to increase interest rates in June because the labor market is really weaker than it appears, former Deputy Treasury Secretary Roger Altman said Thursday.
"I don't think 5.5 percent [unemployment rate] is the best measure of labor market conditions," the former Clinton administration official said in a CNBC "Squawk Box" interview.
Last Friday, the government said the jobless rate fell to 5.5 percent for February, while nonfarm payrolls growth boomed by 295,000, despite the brutal winter conditions.
"If 5.5 percent were really capturing the conditions, you wouldn't see wage growth just barely ticking up," said Altman, founder of Evercore Partners. American worker pay rose just 3 cents an hour for last month, representing a 2 percent annualized gain.
Wage inflation remains low, as do consumer and producer inflation. Fed policymakers have repeatedly said they want to see more pricing pressures before raising rates.
The Fed started cutting rates to their current near zero percent levels in 2007 and 2008. The last Fed funds rate hike was in 2006.
Acting in June or September does not really matter in the greater scheme of things, Altman said. But it's important to act at some point, he argued, to give the Fed another weapon besides bond purchasers to fight future crises. "One of the downsides of QE ... is we don't have anything left in the toolbox if there should suddenly be a crisis. And often crises come out of the blue. The next one never comes where the last one came from."