A top Federal Reserve economist has told an audience in Hartford that while he foresees continued growth in the economy, jobs will continue to lag behind the overall recovery. Eric Rosengren, the President of the Federal Reserve Bank of Boston, was speaking to a meeting of the Connecticut Business and Industry Association. WNPR’s Harriet Jones reports.
Eric Rosengren says he believes there are still significant headwinds facing the economy, including low levels of lending by the banks, cautious spending by consumers, and above all, the continued sluggishness in the labor market. Unemployment nationally is still at 10%, as employers shed another 85,000 jobs in December – that number was particularly unwelcome after a modest gain in jobs in the previous month. Rosengren told the audience that he believes interest rates should remain low, until employment growth is stronger:
“GDP growth is expected to be strong enough to produce some employment growth, but that rate of employment expansion will not likely be rapid enough to put a large dent in the unemployment rate. With significant capacity in labor markets, wages and salaries and the ability of businesses to increase prices are likely to be restrained, resulting in little immediate inflationary pressures. In my view this should allow for accommodative monetary policy, to continue to support the economy until the underlying demand of consumers and businesses become more self-sustaining.”
The economy resumed growth in the third quarter, increasing by 2.2%, after four quarters of decline. Rosengren says he believes the fourth quarter will prove to have consolidated that gain once the numbers come in. Rosengren is about to step into a voting role on Fed policy for 2010.
For WNPR, I'm Harriet Jones.