Fed’s Rosengren Says Important to See If Weak Jobs Were Anomalyby
Boston Fed head says May payrolls contrast with other data
FOMC voter still expects sufficient growth for gradual hikes
Federal Reserve Bank of Boston President Eric Rosengren said he expects U.S. economic conditions to continue improving, making further rate increases appropriate, although it will be important to see whether a weak employment report for May proves to be an anomaly.
“Lately the economic data have been choppy,” Rosengren said in the text of a speech prepared for delivery at a central banking conference in Helsinki on Monday. “However, I still expect sufficient economic growth to justify a gradual removal of accommodation.”
Federal Reserve officials are debating whether the economy is strong enough to handle what would be only the second rate increase in about a decade, and have said they’ll evaluate incoming economic data to help decide. The Fed raised rates in December for the first time since 2006.
While weak job creation in May could give the policy-setting Federal Open Market Committee pause when it meets in Washington June 14-15, other signs suggest that the Fed is moving toward achieving its dual mandate of stable prices and full employment, said Rosengren, an FOMC voting member this year.
“Given that the labor market contrasts with the pattern in the first quarter, and the pick-up in spending observed so far from other data, it will be important to see whether the weakness in this report is an anomaly or reflects a broader slowing in labor markets,” Rosengren said.
On prices, “while it is only gradual progress, we are seeing some evidence of inflation moving toward the 2 percent inflation target,” he said.
The U.S. economy created just 38,000 jobs in May, fewer than in any month in almost six years, a Labor Department report showed on Friday. What’s more, many people dropped out of the labor market during the month, and a higher share worked part-time jobs for economic reasons.
Another 2016 FOMC voter, Cleveland Fed President Loretta Mester, said on Saturday that the weak May employment number hadn’t fundamentally altered her outlook.
“I still believe that in order to achieve our monetary policy goals a gradual upward pace of the funds rate is appropriate,” Mester told reporters in Stockholm after a speech on financial stability.
Rosengren’s comments are among the last expected from Fed officials before they enter their customary quiet period ahead of the June meeting. Fed Chair Janet Yellen will speak in Philadelphia later on Monday about the economic outlook and monetary policy.