The Federal Reserve’s aggressive easing of monetary policy is warranted given the still-battered state of the U.S. labor market, Fed Vice Chairwoman Janet Yellen said on Monday.
In an address to the politically influential AFL-CIO, the largest U.S. labor group, Yellen, a potential successor to Fed Chairman Ben Bernanke next year, bemoaned the unusually weak nature of the economic expansion.
“The gulf between maximum employment and the very difficult conditions workers face today helps explain the urgency behind the Federal Reserve’s ongoing efforts to strengthen the recovery,” Yellen said.
“We have taken, and are continuing to take, forceful action to increase the pace of economic growth and job creation.”
The U.S. economy contracted slightly in the fourth quarter of 2012 and, while that decline is seen as temporary, continues to grow at or below 2 percent, far below the rate economists say is needed to bring down the 7.9 percent unemployment rate.
Yellen pointed to erratic U.S. budget policy as one source of weakness in the recovery.
“I expect that discretionary fiscal policy will continue to be a headwind for the recovery for some time, instead of the tailwind it has been in the past,” she said.
Chosen excerpts by Job Market Monitor from
via Fed taking forceful action on economy, Yellen says | Reuters.
FRB: Speech with Slideshow–Yellen, A Painfully Slow Recovery for America’s Workers: Causes, Implications, and the Federal Reserve’s Response–February 11, 2013
Vice Chair Janet L. Yellen at the “A Trans-Atlantic Agenda for Shared Prosperity” conference sponsored by the AFL-CIO, Friedrich Ebert Stiftung, and the IMK Macroeconomic Policy Institute, Washington, D.C.
February 11, 2013
A Painfully Slow Recovery for America’s Workers: Causes, Implications, and the Federal Reserve’s Response
Thank you for the opportunity to speak to you today about the Federal Reserve\’s efforts to strengthen the recovery and pursue a goal that it shares with the labor movement: maximum employment.
As an objective of public policy, maximum employment doesn\’t appear in the U.S. Constitution, in any presidential decree, or even in the mission statement of the Labor Department. A law passed in 1946 made it a general goal for the U.S. government, but so far the Federal Reserve is the only agency assigned the job of pursuing maximum employment. The 1977 law spelling out that responsibility also assigned the goal of stable prices, and we call this combination of objectives the Federal Reserve’s dual mandate.
With so many people today unable to find work, it might seem odd to highlight such an ambitious and distant goal for employment. I do so because the gulf between maximum employment and the very difficult conditions workers face today helps explain the urgency behind the Federal Reserve’s ongoing efforts to strengthen the recovery. My colleagues and I are acutely aware of how much workers have lost in the past five years. In response, we have taken, and are continuing to take, forceful action to increase the pace of economic growth and job creation.
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