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.
Chosen excerpts by Job Market Monitor. Read the whole story at
via FRB: Speech with Slideshow–Yellen, A Painfully Slow Recovery for America’s Workers: Causes, Implications, and the Federal Reserve’s Response–February 11, 2013.
US / FED / Yellen Says Fed Should Tie Rate Inflation and Employment
Federal Reserve Vice Chairman Janet Yellen backed a proposal to link the Fed’s zero interest-rate policy to progress toward meeting its goals for inflation and employment rather than to a calendar date. “The Committee might eliminate the calendar date entirely and replace it with guidance on the economic conditions that would need to prevail before … Continue reading »
US / FED / Dallas Fed President, Richard Fisher, says Fed might set a target for unemployment
Dallas Fed President Richard Fisher, a top Federal Reserve official, said on Tuesday that his main concern now was unemployment, not inflation. He said another option the Fed might consider to signal its aims to markets was a target for unemployment, although this would be difficult because monetary policy alone was not responsible for creating jobs. … Continue reading »
FED / Lockhart / Aggressive Easing Needed For Jobs
Federal Reserve Bank of Atlanta President Dennis Lockhart said forceful central bank policies will remain needed to spur job growth even if Congress averts sudden tax increases and spending cuts at the end of the year. “I expect that continued aggressive use of balance sheet monetary tools will be appropriate and justified by economic conditions … Continue reading »
The New Fed Unemployment Target: The story behind
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How to get to the 6.5% unemployment rate target: roughly 270,000 jobs each month
The Federal Reserve predicts it will keep stimulative policies in place until the unemployment rate falls to 6.5%. But just how many jobs will it take to get there? As of November, the unemployment rate was 7.7%. In order to drop to 6.5% immediately, it would require 1.9 million jobs to be created right now. … Continue reading »
FED / Targeting unemployment and inflation
The Federal Reserve announced Wednesday that it will take unprecedented steps to bolster the economy, saying it will continue to stimulate growth until the unemployment rate falls to 6.5 percent or the inflation rate reaches 2.5 percent. The Fed said it did not expect unemployment to reach that benchmark until 2015. It was a historic … Continue reading »
Fed’s Rosengren: unemployment is well above a longer-run sustainable rate
Aggressive policy easing will remain necessary for the simple reason that levels of both U.S. unemployment and inflation are not where the Federal Reserve wants them to be, a top U.S. central bank official said on Tuesday. In a textbook argument that appeared to push back at some of his more hawkish peers, Boston Fed … Continue reading »
Federal Reserve – US unemployment “remains elevated”
The Federal Reserve has reiterated that the US economy is only growing slowly, and that the country’s unemployment rate “remains elevated”. Yet it added that the housing market had “shown some further signs of improvement”. The comments came as the US central bank kept interest rates on hold at between zero and 0.25%, as had … Continue reading »
How do Fed actions bring job growth ?
In discussions about the Fed actions, it occurred to me that many of the explanations that link the Fed’s moves to stronger job growth leave out a number of steps in the middle. It’s of course not the case that the Fed buys MBS or announces they’ll keep rates low and jobs that weren’t there …Continue reading »
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