Fed's Dudley Says He's Encouraged by Expansion in U.S. Manufacturing Jobs
Federal Reserve Bank of New York President William Dudley said February’s increase in U.S. jobs gives him more confidence that January’s figures were dampened by harsh weather and reiterated the labor market will pick up.
“Particularly encouraging is the growth of manufacturing jobs,” Dudley, 58, said today in a speech in Flushing, New York. “This makes me more confident that job growth in January was temporarily depressed by unusually bad winter weather.” Other labor market indicators, including claims for unemployment insurance benefits, “have also shown improvement recently,” Dudley said.
At the same time, Dudley reiterated his remarks from Feb. 28 that “sustained strong employment growth” is needed to assure the recovery, echoing recent comments from Chairman Ben S. Bernanke. The Fed is about halfway through with its plan to buy $600 billion of Treasuries through June in a second round of so-called quantitative easing aimed at combating too-low inflation, stimulating economic growth and creating jobs.
The unemployment rate fell to 8.9 percent in February, the lowest in almost two years, and ending the longest period of unemployment at 9 percent or higher since monthly records began in 1948.
While most of Dudley’s economic remarks were similar to those delivered Feb. 28 in New York, he omitted a comment that it’s not yet time to withdraw record monetary stimulus amid movement toward the Fed’s mandates for stable prices and maximum employment. He spoke four days before the Federal Open Market Committee meets in Washington. Fed officials tend to avoid comments about monetary policy during the week before an FOMC meeting.
In last week’s speech, Dudley said that “faster progress toward these objectives would be very welcome and need not require an early change in the stance of monetary policy.” Today, he shortened that to “faster progress toward these objectives would be very welcome.”
Dudley said that because of the FOMC meeting next week, he wasn’t commenting on the implication of the outlook for monetary policy.
He said the Fed has the tools, such as raising the interest rate paid on bank reserves, to tighten credit when needed.
“People worry that these purchases will ultimately be inflationary, and I don’t think they have anything to worry about,” Dudley said in response to questions after the speech. “We are absolutely determined to prevent any long-term inflation problem.”
The availability of credit to small businesses is improving, Dudley said. “I don’t think this is going to turn around very quickly,” he said. “I would say the worst is past.”
The asset purchases, announced in November, sparked the harshest political backlash against the Fed in three decades with Republican lawmakers warning that the additional stimulus risked sparking a surge in prices. The so-called quantitative easing program was dubbed “QE2” by analysts and investors because it followed an earlier round of $1.7 trillion of asset purchases that ended in March 2010.
Dudley is also vice chairman of the policy-setting FOMC, which has kept its benchmark interest rate near zero since December 2008.
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