Yellen Says Weak Job Market Shows U.S. Still Needs Stimulus
Federal Reserve Chair Janet Yellen told lawmakers the central bank must press on with record monetary stimulus to combat persistent job-market weakness.
“There are mixed signals concerning the economy,” Yellen said in response to questions during testimony to the Senate Banking Committee today. “We need to be careful to make sure that the economy is on a solid trajectory before we consider raising interest rates.”
While her “overall view is more positive,” Yellen said low wages are one sign of “significant slack” in labor markets, even after the jobless rate fell to an almost six-year low. In unusually emotive language for a central banker, she talked about the “psychological trauma” suffered by the unemployed and their families.
“She is a determined dove,” David M. Jones, president of Denver-based economic consulting firm DMJ Advisors LLC and a former Fed economist who has written four books on the central bank, said today in a Bloomberg Radio interview. “She’s more worried about improving labor-market conditions, the long-term unemployed, flat wages, and other kinds of indications that there’s still considerable slack in the labor market. In her heart, that drives her decision.”
In prepared testimony, Yellen repeated that interest rates are likely to stay low for a “considerable period” after the Fed ends its asset-purchase program, which she said could happen following the October meeting.