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Fed Yellen thoughts about long-term unemployed

Yellen Says Recovery in Labor Market Far From Complete

Fed Yellen thoughts about long-term unemployed

Image courtesy of [ddpavumba] / FreeDigitalPhotos.net 

Federal Reserve Chairman Janet Yellen pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps” and signaled that the bar is high for a change in that plan.

Only a “notable change in the outlook” for the economy would prompt policy makers to slow the pace of tapering, Yellen said in response to a question today during testimony to the House Financial Services Committee. “It’s important for us to take our time to assess” the significance of recent reports showing payrolls expanded less than projected, she said.

Stocks and Treasury yields climbed as Yellen, delivering her first public remarks as Fed chairman, said financial-market turmoil doesn’t pose a major risk to the outlook for the U.S. economy and repeated the Fed’s statement that asset purchases aren’t on a “pre-set course.”

“Her message was continuity of policy and, matching that with continuity of outlook, suggests they remain on the same course,” saidKeith Hembre, a former Minneapolis Fed researcher who helps oversee $125 billion as chief economist at Nuveen Asset Management LLC in Minneapolis.

The Standard & Poor’s 500 Index rallied 1.2 percent to 1,821.62 at 3:32 p.m. in New York. The yield on the 10-year note rose five basis points, or 0.05 percentage point, to 2.72 percent.

While growth has picked up, “the recovery in the labor market is far from complete,” Yellen said earlier in prepared remarks. “I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.”

Asset Prices

Asset prices aren’t at “worrisome levels” even after the S&P 500 soared 30 percent last year, Yellen said, although the Fed is on the lookout for any threat of a bubble.

“Our ability to detect bubbles is not perfect, but looking at a range of traditional valuation measures doesn’t suggest that asset prices broadly speaking are in bubble territory,” she said in response to a question.

The Fed chairman spoke days after a government report showed the jobless rate unexpectedly declined almost to the Fed’s threshold for considering an increase in the benchmark interest rate, even as payrolls growth cooled.

Yellen said the unemployment rate alone isn’t an adequate gauge of labor-market health.

Policy makers, who will see another jobs report before they next meet in March, “would be looking at a broad range of data on the labor market, including unemployment, job creation and many other indicators of labor market performance,” she said.

Watching Volatility

Yellen also said that the Fed has been “watching closely” volatility in global financial markets and that “our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook.”

In more than four hours of questioning, Yellen was pressed for her views on issues ranging from financial regulation and the budget deficit to coal prices and income inequality. She took care to avoid wading into partisan debates on subjects like the impact of the Affordable Care Act on the labor market.

In response to a question from Texas Democrat Ruben Hinojosa, Yellen said she’s troubled by growing income inequality.

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