Feb. 11--Janet Yellen, in her first appearance before Congress as the new chairwoman of the Federal Reserve, said she was taken aback by the sharp slowdown in job growth seen in the last two months and the Fed is closely watching the situation.
Job growth slowed to 75,000 in December and 113,000 in January after running at a pace close to 200,000 a month earlier in 2013, the Labor Department reported on Friday.
In testimony before the House Financial Service Committee that suggested a continuity of policy in line with predecessor Ben Bernanke, Ms. Yellen emphasized that the central bank has been slowly winding down its extraordinary easing programs based largely on the expectation that last year's stronger pace of job growth would continue.
"I was surprised that the pace of job creation was running under what I anticipated," she said, "but we have to be very careful in jumping to conclusions about what those reports mean."
Ms. Yellen's testimony gave a modest lift to financial markets, with the Dow Jones Industrial Average up by around 136 points at noon -- a reaction that likely was intended and welcomed as an indication that she passed her first test in the markets as well as in Congress.The sharp slowdown in job growth may have been caused in part by particularly cold weather, she said, adding that the central bank will closely scrutinize the jobs report for February to see if the slowing trend continued this month. The jobs report for February will come out in early March before the next meeting of the Fed's policy-making committee.
While the Fed was taken aback by the job slowdown, Ms. Yellen did not indicate it would immediately stop its campaign to withdraw liquidity from financial markets unless it finds that the slowing trend is a lasting one.
"What would cause us to pause is a notable change in outlook. We're looking for continued improvement in the labor market. If data were to raise questions about that," the Fed might decide to change course, she said.
Ms. Yellen noted that despite the Fed's strenuous efforts to nurture stronger economic growth and job creation, wages remain stagnant for most Americans in the middle class and low-income groups while inequality has grown as the wealthy have captured most of the growth in incomes in recent years.
She urged Congress to address rising inequality and lingering high unemployment among low-income and disadvantaged groups by passing legislation to help upgrade the job skills of those groups so they can get jobs with better wages.
The Fed's low-interest rate policies have helped to spur job growth, and are helping to alleviate the hardships borne by lower wage groups, but those policies cannot entirely on solve their problems, she said.
"This is by no means a panacea to inequality, but I think we will see gains throughout the economy" as the Fed continues to nurture stronger growth, she said.
Ms. Yellen declined to give Congress advice on the often-testy issues of budget deficits and spending, insisting that deficits and debt are primarily a long-run problem that has the potential to impair economic growth in future decades if they continue to grow to unsustainably.
Stressing that she intends to largely continue the policies laid down by Mr. Bernanke, Ms. Yellen took the unusual step of prefacing her remarks with a lavish statement of praise for Mr. Bernanke, who remains in Washington and has taken a position at the Brookings Institution.
"Let me acknowledge the important contributions of Chairman Bernanke. His leadership helped make our economy and financial system stronger and ensured that the Federal Reserve is transparent and accountable. I pledge to continue that work," she said.
(c)2014 The Washington Times (Washington, DC)
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Original headline: Yellen 'surprised' by weaker job numbers
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