Yellen Says Job Market Improving but Noncommittal About Policy Effect
DOW JONES & COMPANY, INC. 10:01 AM ET 08/22/14
By Jon Hilsenrath and Pedro Nicolaci da Costa
JACKSON HOLE, Wyo.--Federal Reserve Chairwoman Janet Yellen pointed to an improving U.S. job market, but was noncommittal about how this progress would affect monetary policy in a speech before global central bankers at an economic symposium here.
"The economy has made considerable progress in recovering from the largest and most sustained loss of employment in the United States since the Great Depression," she said remarks prepared for delivery Friday here. "These developments are encouraging, but it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover."
Ms. Yellen stuck to an equivocal line she used in July in testimony to Congress. If the job market continues to improve more rapidly than expected or inflation rises quickly to the Fed's 2% goal, the Fed could raise rates sooner than expected. But if progress stalls, low rates will persist.
She delivers her comments amid a deepening debate at the U.S. central bank about when to start raising short-term interest rates from near zero, where they have been since December 2008. Many Fed officials don't expect to move rates until mid-2015, but a falling jobless rate and other indicators of improving job markets has led some officials to press for earlier moves.
Labor indicators "have improved more rapidly than the (Fed) had anticipated," Ms. Yellen acknowledged. However her comments made clear that she isn't ready to move, in part because she is grappling for answers to questions about puzzling labor markets scrambled by the 2008 financial crisis.
"There is no simple recipe for appropriate policy in this context," Ms. Yellen said. "Monetary policy ultimately must be conducted in a pragmatic manner that relies not on any particular indicator or model, but instead reflects an ongoing assessment of a wide range of information in the context of our ever-evolving understanding of the economy."
Judging the degree of slack in the economy is particularly hard right now, she argued, because of shifts in labor force participation, part-time employment, the demographics of the workforce, wage growth and broader measures of labor market dynamism. "A considerable body of research suggests that the behavior of these and other labor market variables has changed since the Great Recession," she said, complicating her decisions.
Write to Jon Hilsenrath at jon.hilsenrath@wsj.com and Pedro Nicolaci da Costa at pedro.dacosta@wsj.com
(END) Dow Jones Newswires
08-22-141001ET
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