Bernanke: Labor Market ‘Long Way’ From Normal
Federal Reserve Chairman Ben S. Bernanke repeated that the job market is still far from healthy after signs of economic improvement over the past year, and he called on lawmakers to reduce the long-term budget deficit.
“We still have a long way to go before the labor market can be said to be operating normally,” Bernanke said in testimony prepared for the Senate Budget Committee that is identical to remarks he gave on Feb. 2 to the House Budget panel. “Particularly troubling is the unusually high level of long-term unemployment.”
The jobless rate unexpectedly fell to 8.3 percent in January, a government report showed on Feb. 3. Bernanke’s testimony today indicated that his views on the health of the labor market haven’t changed, even though he didn’t refer to the January data. The economy added 243,000 jobs last month, according to the report, exceeding the most optimistic forecast in a Bloomberg News survey of economists.
In response to a question, Bernanke said the unemployment rate of 8.3% understates the weakness of the labor market. He said it’s important to also look at other gauges of the labor market, including underemployment.
While the jobless rate has dropped for five consecutive months, it remains above the 5.2 percent to 6 percent that Fed officials say is consistent with maximum employment. The percentage of the unemployed who have remained without work for 27 weeks or more rose to 42.9 percent in January from 42.5 percent in December, the Labor Department said.
“Over the past two and a half years, the U.S. economy has been gradually recovering from the recent deep recession,” Bernanke, 58, said today. “While conditions have certainly improved over this period, the pace of the recovery has been frustratingly slow, particularly from the perspective of the millions of workers who remain unemployed or underemployed.”
Bernanke reiterated that the benchmark interest rate will probably stay near zero at least through late 2014, while saying the economy is vulnerable to shocks.
Stocks rose as Greece’s government made progress on measures to secure international aid. The Standard & Poor’s 500 Index climbed 0.1 percent to 1,346.21 at 11:27 a.m. in New York. The yield on the 10-year Treasury note rose to 1.97 percent from 1.91 percent late yesterday.
A Labor Department report today showed job openings in the U.S. increased in December by the most in almost a year, showing employers are gaining confidence the economy will keep growing.
Waiting to Be Filled
The number of positions waiting to be filled climbed by 258,000, the biggest gain since February 2011, to 3.38 million. Excluding government agencies, openings at private employers climbed to the highest level since August 2008.
Bernanke repeated his call on lawmakers to reduce budget deficits.
“To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time,” Bernanke said.
The nonpartisan Congressional Budget Office said last week it expects the deficit to narrow to $1.1 trillion this fiscal year from $1.3 trillion last year. The gap would reach $1.5 trillion by 2022, CBO estimated, and the debt would rise to levels unseen since the government was paying off its World War II expenses.
Congress should “take care not to unnecessarily impede the current economic recovery,” Bernanke said. Replying on Feb. 2 to lawmakers’ questions, he declined to voice his views on policies such as the payroll tax cut and unemployment benefits.
Private payrolls, which exclude government agencies, rose 257,000 in January after a revised gain of 220,000 the prior month, marking the biggest back-to-back gain since March-April. They were projected to climb by 160,000.
The unemployment rate, derived from a separate survey of households, was forecast to stay at 8.5 percent, according to the median of a Bloomberg survey. The drop in the jobless rate reflected a 381,000 decrease in unemployment at the same time 250,000 Americans entered the labor force.
St. Louis Fed President James Bullard said after the jobs report that economic news “has been surprising to the upside.”
“I need to see significant deterioration in the economy and some threat of deflation or inflation moving significantly below our inflation target before” backing more bond buying by the Fed, he said in a Bloomberg News interview.
Fed policy makers see inflation declining in 2012 to below their 2 percent target, with most expecting prices to rise 1.4 percent to 1.8 percent this year, according to forecasts released Jan. 25. Bernanke said he expects inflation to “remain subdued.”
The price gauge preferred by the Fed, the personal consumption expenditures index, increased 2.4 percent in December from a year earlier, down from 2.6 percent the previous month. The pace of so-called core inflation, which excludes food and energy, increased to 1.8 percent in December from 1.7 percent the month before.
Companies such as Procter & Gamble Co., Kimberly-Clark Corp. and Darden Restaurants Inc. have been cutting prices, offering coupons and emphasizing “affordability” in promotions such as an $8.95 “Never Ending Pasta Bowl” at Darden’s Olive Garden restaurant chain. The companies have found that consumers, who have experienced little wage growth, are resisting price increases.
The central bank has kept interest rates close to zero since December 2008 and expanded its balance sheet by buying $2.3 trillion in bonds.
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