財經觀察 2264: Bernanke sees slow jobs growth

Bernanke sees slow jobs growth

By Krishna Guha in Washington

Published: December 7 2009 21:14 | Last updated: December 7 2009 21:19

An upbeat Ben Bernanke dampened market speculation on Monday that Friday’smuch stronger-than-expected jobs report could lead to a rapid recalibration of Federal Reserve policy.

The Fed chairman told the Economic Club of Washington: “Though we have begun to see some improvement in economic activity, we still have some way to go before we can be assured that the recovery will be self-sustaining.”
e said it also remained unclear “whether the recovery will be strong enough to create the large number of jobs that will be needed to materially bring down the unemployment rate”.

The Fed’s own view, he said, was that recovery would be sustained with modest, and implicitly slightly above trend, growth “sufficient to bring down the unemployment rate but at a pace slower than we would like”.

The Fed chief appeared to signal that the US central bank would not drop the key phrase in its statement that says it expects to keep rates at “exceptionally low” levels for an “extended period” at its policy meeting next week.

“Right now we are still looking at the extended period,” he said, pointing to “low rates of utilisation, subdued inflation trends and stable long-term inflation expectations”.

At the same time, he said: “There’s been some signs of strength recently.We’ll want to factor that in as we talk about this next week.” This suggests that some change in the statement is likely, though not necessarily to the section that explicitly deals with interest rate guidance.

The Fed introduced new language in its statement at the last meeting listing the factors on which it based its conditional forecast for interest rates ? conditions that if breached could lead to earlier rate hikes. These include low rates of resource utilisation ? a concept that includes high unemployment.

One way to factor the better jobs picture revealed by the Friday jobs report into the statement would be to simply highlight it in the Fed’s discussion of the state of the economy.

An alternative would be to tweak further the “extended period” phrase that provides guidance on interest rates itself. That would be viewed by the markets as a more hawkish signal than simply changing the economic commentary.

Mr Bernanke was in jocular mood on Monday, in sharp contrast to his sober appearance at a tough reconfirmation hearing in the Senate banking committee last week. He was, however, adamant that the Fed’s aggressive policies would not lead to a dose of excess post-crisis inflation.

“Elevated unemployment and stable inflation expectations should keep inflation subdued,” he said. “Indeed, inflation could move lower from here.”

Despite Mr Bernanke’s caution on policy, the jobs report was stronger than the Fed had expected. It suggests the jobs market may stabilise a couple of months sooner than expected.

The jobs report also means that the unemployment rate at the end of next year will be slightly lower than previously expected ? though Fed officials are unlikely to amend their projections by more than about a quarter point.

On its own, however, it is unlikely to alter dramatically their perception of how rapidly growth will pick up and unemployment will decline over the course of next year.