Federal Reserve Chair Janet Yellen said “considerable slack” in the labor market is evidence that the central bank’s unprecedented accommodation will still be needed for “some time” to put Americans back to work.
Large numbers of partly unemployed workers, stagnant wages, lower labor-force participation and longer periods of joblessness show that Fed officials must continue their easing, Yellen said today in remarks prepared for a speech in Chicago.
“This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed,” Yellen said in her remarks to a Fed community development conference. “The scars from the Great Recession remain, and reaching our goals will take time.”
The Fed has sought to bring down borrowing costs, fuel growth and put 10.5 million unemployed Americans back to work through bond buying that has more than quadrupled its assets to $4.23 trillion. The Federal Open Market Committee has kept the benchmark interest rate near zero since December 2008.
While policy makers have slowed the pace of their monthly asset purchases over the past three gatherings to $55 billion from $85 billion, Yellen said the central bank’s “commitment is strong” to helping sustain progress in the job market.
“Recent steps by the Fed to reduce the rate of new securities purchases are not a lessening of this commitment, only a judgment that recent progress in the labor market means our aid for the recovery need not grow as quickly,” she said. “Earlier this month, the Fed reiterated its overall commitment to maintain extraordinary support for the recovery for some time to come.”
Stocks extended gains after Yellen’s comments, with the Standard & Poor’s 500 Index (CME:SPM14) rising 0.8 percent to 1,872.72 at 10 a.m. in New York. The yield on the 10-year Treasury note was up three basis points, or 0.03 percentage point, to 2.75 percent.
Yellen has focused on the labor market and the human cost of unemployment for much of her career as an academic and central bank official. After three years as Fed vice chair, she was sworn in last month to succeed Ben S. Bernanke.
The FOMC said in a policy statement this month that rates will likely remain low for a considerable time after the bond buying program ends. The committee said it will weigh a “wide range of information,” including labor-market measures, in deciding when it will eventually begin raising rates.
Unemployment was 6.7 percent in February, up from the 6.6 percent level in January that was the lowest since October 2008. The economy added 175,000 jobs in February, more than economists projected, following the weakest two-month hiring gain in more than a year in December and January.
Yellen said at her first press conference as Fed chair on March 19 that she expects most Americans know someone who was jarred by the financial crisis and the ensuing high unemployment.
“That is true of me and my family and friends, I think as it is probably for many--for many of you,” she said at the press conference. She has focused on reducing the human cost of the crisis since the start of her tenure as San Francisco Fed president from 2004 to 2010.
“We worked very closely, particularly in low-income communities that have been very badly affected to design programs that could potentially be helpful,” Yellen said to reporters. “We’ve tried to study what kind of programs can be most effective and to try to understand what kinds of advice we could give to those in the community development lending field to help.”