Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said U.S employment growth remains “disappointing” and that an elevated jobless rate may persist even as the expansion continues.
“The erosion in labor-market performance that we’ve seen in the United States over the past five years may be highly persistent, even under appropriate monetary policy,” Kocherlakota said today in a speech in Minneapolis that was similar to his May 23 comments in Rapid City, South Dakota.
The Minnesota regional bank chief’s remarks followed Fed Chairman Ben S. Bernanke’s testimony to lawmakers earlier today that “rapid gains in economic activity will be required to achieve significant further improvement in labor-market conditions.” Fed Vice Chairman Janet Yellen said yesterday slowing job growth and deteriorating financial-market conditions show the U.S. economy “remains vulnerable to setbacks” and may warrant additional monetary stimulus.
The U.S. added 69,000 jobs last month compared with 275,000 in January, even as the Federal Open Market Committee sustained record stimulus that included a pledge to keep the benchmark interest rate near zero until at least late 2014.
Job growth in May was less than half the number forecast by economists, while April payrolls were revised down to 77,000 from 115,000, Labor Department figures showed June 1. The unemployment rate unexpectedly rose to 8.2 percent from 8.1 percent for the first increase since June 2011.
The U.S. economy isn’t at risk of falling into a crisis like Greece’s because policy makers in the world’s largest economy are capable of agreeing on how to handle the fiscal demands of entitlement programs that serve an aging population, Kocherlakota said.
“There’s a great deal of confidence, which I share myself, that American voters and policy makers are interested in getting their debt problem under control,” he said in response to a question from the audience. “I’ve been impressed with the willingness of the people to come together and talk about an issue that is a long-term one” involving “promises made to older citizens that are embedded in legislation.”
The Minneapolis Fed chief dissented from a FOMC pledge in August to keep interest rates near zero through mid-2013, and a decision in September to sell $400 billion of short-term Treasuries and buy $400 billion of longer-term securities. He opposed the central bank’s decision to increase accommodation at a time when the economy was showing signs of healing.
Kocherlakota, 48, was an economics professor at the University of Minnesota before becoming head of the regional bank in October 2009. He was an economist at the Minneapolis Fed from 1996 to 1998.