Federal Reserve Bank of Chicago President Charles Evans said the U.S. job market is “doing better” thanks to record policy stimulus, while adding that he wants to see employment gains continue through the summer.
“During the time that we’ve been doing our asset-purchase program, the labor market has improved, definitely,” Evans said, speaking today in an interview with Michael McKee on Bloomberg Television. “I’d like to have confidence that we can sustain that improvement in the labor market through the summer.”
The Federal Open Market Committee pledged last week to slow or speed up the pace of its monthly bond-buying in response to changes in employment or inflation. A report last week showed the jobless rate unexpectedly dropped to 7.5 percent in April and payrolls grew by a greater-than-forecast 165,000. Revisions to the prior two months’ reports added a total of 114,000 jobs to the employment count in February and March.
“Our policies have been helpful,” said Evans, who votes on the FOMC this year. “Auto-loan rates are lower, mortgage rates are lower, and the economy’s beginning to pick up.”
The number of Americans filing claims for jobless benefits unexpectedly dropped last week to the lowest level in more than five years, a signal employers are confident enough in the economic outlook to hold onto workers.
Applications for unemployment insurance payments decreased by 4,000 to 323,000 in the week ended May 4, the least since January 2008, Labor Department figures showed today. Economists forecast 335,000 claims, according to the median estimate in a Bloomberg survey. For the first time, the average over the past month was the lowest since before the last recession began.
U.S. stocks fell following five successive records for the Standard & Poor’s 500 Index, which has rallied 14 percent this year. The S&P 500 declined 0.3 percent to 1,628.43 at 12:29 p.m. in New York. The yield on the 10-year Treasury note rose to 1.8 percent from 1.77 percent late yesterday.
Evans, 55, has been among the most vocal advocates for accommodative policy at the Fed, dissenting from FOMC decisions in November and December 2011 while calling for more easing.
Monetary policy is “leaning against a lot of headwinds,” he said, such as cuts in government spending that slow economic growth.
The FOMC said at the conclusion of its April 30-May 1 meeting that it will keep buying $85 billion a month in Treasuries and mortgage bonds until it sees substantial improvement in the labor market. At their March 19-20 gathering, several Fed officials said the central bank should begin tapering its purchase program later this year and stop it by year-end, according to minutes of the meeting.
Evans was an early advocate of tying the Fed’s zero interest rate policy to economic indicators, a move that the FOMC adopted in December. He also voiced support early for the Fed’s current round of bond buying known as quantitative easing.
Evans today reiterated that he’s looking for monthly job growth of at least 200,000 for six months. Payrolls have been “averaging that” and he’s looking for the gains to continue, he said, speaking on the sidelines of the Chicago Fed’s annual banking conference.
Inflation has been “too low,” he said, adding that the decline is “transitory” and “it’s too early” to respond with a policy shift.
Other Fed officials have expressed concern about slowing inflation in recent weeks. Richmond Fed President Jeffrey Lacker said in April he would consider more stimulus if inflation is projected to “sag further.” The Minneapolis Fed’s Narayana Kocherlakota called for guarding the Fed’s 2 percent inflation target “from below,” and James Bullard of St. Louis said, “we should defend the inflation target from the low side.”
Inflation was at 1 percent in March, marking the slowest pace since 2009, according to the personal consumption expenditures index, the Fed’s preferred gauge.
The Fed’s unprecedented bond purchases aren’t distorting the market for U.S. Treasuries, Evans said.
“I’m not concerned we’re having an effect other than the one we intend, which is to provide a slight reduction in yields,” he said, adding he’s not “too concerned” about the possibility that the Fed will provoke a bond market rout when it starts to withdraw record accommodation.