Lacker says Fed can't ease structural joblessness

WASHINGTON Mon May 7, 2012 10:53pm EDT

File photo of Richmond Federal Reserve Bank President Jeffrey Lacker. REUTERS/Chris Keane (UNITED STATES - Tags: BUSINESS)

File photo of Richmond Federal Reserve Bank President Jeffrey Lacker.

Credit: Reuters/Chris Keane (UNITED STATES - Tags: BUSINESS)

WASHINGTON (Reuters) - Further monetary stimulus would not do much for a U.S. labor market that is plagued by longer-term, structural issues like skills mismatches, Richmond Federal Reserve Bank President Jeffrey Lacker said on Monday.

Data released last week showed a still-anemic pace of employment growth, with only 115,000 jobs created in April.

Speaking before a group of business executives and community leaders, Lacker said investments in job training and education would do more for workers than any short-term stimulus.

"If elevated unemployment reflects fundamental factors rather than insufficient spending, such stimulus might have little impact on unemployment and instead just raise the risk of pushing up inflation," Lacker said.

Lacker, an inflation hawk, has dissented three times this year against the Fed's guidance that it will probably keep interest rates near zero until at least late 2014. Lacker believes rates will have to rise in the middle of next year.

He said local business contacts reinforced his sense that structural unemployment is a major part of the problem.

"Although demand is beginning to increase, (businesses) are unable to respond as quickly as they would like due to an inability to find skilled workers," he said.

In response to the deepest recession in generations, the U.S. central bank slashed interest rates to effectively zero in December 2008 and bought some $2.3 trillion in Treasury and mortgage bonds in an attempt to also push down long-term borrowing costs.

Yet policymakers have grown reluctant to embark on a third round of bond purchases, with the economy expanding just enough to justify leaving policy on hold.

Lacker, who sees U.S. gross domestic product expanding around 2.75 percent this year, said a severe recession in Europe, while not likely, would dampen U.S. economic growth prospects.

"Should a more serious drop in growth or contraction in Europe occur, that could threaten our growth," said Lacker.

(Editing by Leslie Adler and Philip Barbara)

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Comments (3)
TheDagger wrote:
Despite having a Master’s degree, a published book, and several years of experience, I’ve been looking for a job for almost 3 years without success. Why? Either I’m told I’m overqualified**, or I don’t have the laundry list of specific-but-learnable skills in these preposterous job postings.

If employers can’t find the skill sets they need, then they either need to offer much higher wages to lure the few perfectly-qualified individuals away from their current jobs, or they will have to suck it up and hire capable people (like, perhaps, someone who earned his Master’s degree in a year and a half?) and train them in the specific skills they need.

** One interviewer actually said to me, “Why would you want this job? This is a paper-pusher’s job.”

May 07, 2012 11:22pm EDT  --  Report as abuse
MeritMan wrote:
At least you are getting interviews Dagger. I don’t have any sort of degree but employed in an industry and along side people who do. Looks like my future is in sales. Yay!

May 07, 2012 11:52pm EDT  --  Report as abuse
minipaws wrote:
It’s not a skills missmatch. Regardless of skill set, it can always be done cheaper in China or India and that’s where Multinationals are sending the jobs.

May 08, 2012 5:27am EDT  --  Report as abuse
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