Two Federal Reserve officials said they need to see stronger job growth before backing a slower pace of bond purchases as they sought to clarify the level of improvement in the labor market they are seeking.
Several months of job creation exceeding 180,000 and declining unemployment would mean “in the second half of the year or in early 2014 it would be appropriate to consider the tapering off,” Atlanta Fed President Dennis Lockhart said today during a panel discussion in Dayton, Ohio. Chicago’s Charles Evans, speaking on the same panel, said he’d like to see payrolls at “200,000-a-month increases for like six months.”
The presidents’ numerical objectives help clarify a pledge by the Federal Open Market Committee to press on with record bond buying until the labor market improves “substantially.” While Fed officials set different goals, they agree they’ve fallen short of their mandate to ensure full employment. Evans is an FOMC voter this year, while Lockhart is not.
Chairman Ben S. Bernanke said in December policy makers haven’t specified a numerical goal that would prompt the end of asset purchases because “we have a number of different things that we need to look at as we go forward.”
Bernanke’s deputy, Vice Chairman Janet Yellen, has said that in addition to the unemployment rate and pace of payrolls growth, she’ll track hiring, job loss and her forecasts for spending and economic growth.
Evans said to reporters after the panel he wants 200,000 payroll growth “month after month for at least six months, and a rising profile for that would be extremely welcome.”
Some months with a 250,000 increase in payrolls “would be a good sign,” Evans said. “I don’t want to be complacent. I want to make sure I have enough confidence in the improvement in the labor market outlook.”
“I would hope that we can conclude these purchases as soon as possible because that would mean that the economy is ramping up in a very substantial way,” he said during the panel.
The Fed has expanded its balance sheet to a record $3.2 trillion by buying $85 billion a month in Treasuries and mortgage-backed securities to boost economic growth and reduce 7.7% unemployment.
Stocks were little changed and Treasuries advanced after a report from the Labor Department showed more Americans than forecast filed first-time claims for unemployment benefits. The Standard & Poor’s 500 Index rose less than 0.1% to 1,553.74 at 1:22 p.m. in New York. The yield on the 10-year Treasury note fell to 1.76% from 1.81% late yesterday.
The U.S. economy this year probably won’t exceed the modest growth of recent years, Lockhart said at the University of Dayton during a panel moderated by Kathleen Hays of Bloomberg Radio.
“I have not seen enough evidence yet to convince me that 2013 is going to break out of that pattern that we’ve seen, really over the last four years,” Lockhart said. He predicts “a modest pace of growth, inflation that is pretty well contained and a very gradual reduction in unemployment.”
Evans said the economy will probably expand 2.5% or “maybe a little bit more” this year and that “2014 will be much stronger.”
Growth could “reach escape velocity by 2014 so the economy can grow without the really strong support that monetary policy is giving,” he said.
Fed officials will know more about the state of employment when the Labor Department releases its monthly report on job growth at 8:30 a.m. tomorrow in Washington. The median estimate from economists in a Bloomberg survey predicts an increase of 190,000 jobs in March. The unemployment rate is forecast to remain unchanged at 7.7%.
Policy makers said after a meeting last month that their purchases will remain divided between $40 billion a month of mortgage bonds and $45 billion a month of Treasuries. The FOMC repeated that it will hold the main interest rate near zero as long as unemployment remains above 6.5% and inflation is projected not to exceed 2.5%.
The FOMC will be in no hurry to slow its asset purchases this year with inflation below its target, St. Louis Fed President James Bullard said yesterday.
“It is full steam ahead right now,” Bullard said in a Bloomberg Radio interview. “I think that is exactly what the committee is doing.”
Fed Governor Daniel Tarullo said yesterday that while some economic data have exceeded expectations, he wants more consistent job growth before he can support curbing bond buying.
“At the very least what I’d like to see is some good healthy peaks that have job creation well above the rate of new entrants into the labor market,” followed by a “plateau that can be the basis for some more peaks later,” Tarullo told CNBC.
Lockhart, 66, was a banking executive and Georgetown University professor before he was appointed to lead the Atlanta Fed in 2007. Evans, 55, became president of the Chicago reserve bank in 2007 after serving as its director of research.