New Federal Reserve Chair Janet Yellen said on Tuesday the labor market recovery is “far from complete” despite a drop in unemployment, yet she said the U.S. central bank expects to continue trimming policy stimulus in measured steps due to broader improvements in the economy.
In her first public comments as Fed chief, Yellen, giving a balanced testimony to a House committee, nodded to the recent volatility in global financial markets, but said at this stage it does “not pose a substantial risk to the U.S. economic outlook.”
She emphasized continuity in the Fed’s approach to policy, saying she strongly supports the approach driven by her predecessor, Ben Bernanke.
While the unemployment rate has fallen by 1.5 percentage points since the latest bond-buying program began in September of 2012, at 6.6 percent the rate remains “well above levels” the Fed sees as consistent with maximum sustainable employment, Yellen said.
“(T)he recovery in the labor market is far from complete,” she said according to prepared remarks to the Republican-controlled House Financial Services Committee.
Yellen, in just her second week on the job, cited the “unusually large fraction” of jobless Americans who have been out of work for more than six months, and the “very high” number of part-time workers who would prefer full-time jobs.
“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market,” she said.
More than five years after the recession ended, the Fed has embarked on perhaps its most difficult policy shift as it tries to back away from flooding the financial system with ultra-easy money while at the same time convince investors that interest rates will stay near zero well into next year.
Encouraged by momentum in the economy last year, the Fed has trimmed asset purchases twice since December; it now buys $65 billion in Treasuries and mortgage bonds each month, to keep borrowing costs low and encourage investment and hiring.