Federal Reserve Chairman Ben S. Bernanke said the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market.
“It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said today in response to questions at a hearing before the Senate Budget Committee in Washington. “There are also a lot of people who are either out of the labor force because they don’t think they can find work” or in part-time jobs.
The jobless rate unexpectedly fell to 8.3 percent in January, a government report showed on Feb. 3. Bernanke’s remarks indicate that his view that the labor market is a “long way” from returning to normal hasn’t changed since he used the same phrase when he testified to the House Budget Committee on Feb. 2.
“The 8.3 percent no doubt understates the weakness of the labor market in some broad sense,” Bernanke said today, while noting that some job indicators are improving.
Bernanke said the Fed’s forecast suggests the economy will grow fast enough to absorb new entrants into the workforce while “not making sharp improvements on the unemployment rate.”
Fed officials last month estimated that the world’s largest economy will grow 2.2 percent to 2.7 percent this year, according to the central tendency estimate, while the unemployment rate will average 8.2 percent to 8.5 percent in the fourth quarter.
“We still have a long way to go before the labor market can be said to be operating normally,” Bernanke said earlier in prepared testimony that was identical to his Feb. 2 remarks. “Particularly troubling is the unusually high level of long-term unemployment.”
The economy added 243,000 jobs last month, according to the report, exceeding the most optimistic forecast in a Bloomberg News survey of economists.
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.
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. The Federal Open Market Committee on Jan. 25 extended its horizon for low rates from an earlier date of at least mid-2013.
Progress in Greece
Stocks rose as Greece’s government made progress on measures to secure international aid. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,347.33 at 1:56 p.m. in New York. The yield on the 10-year Treasury note rose to 1.98 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.
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.
“On current, reasonable expectations about policy that the U.S. federal deficit will be unsustainable within 15 or 20 years at the most,” Bernanke said. “Possibly some of those effects will be brought forward by markets, for example,” he said during testimony.