Fed's Bullard says U.S. labor market improving

WASHINGTON Wed Feb 19, 2014 2:58pm EST

James Bullard, President of the St. Louis Federal Reserve Bank, speaks during an interview with Reuters in Boston, Massachusetts August 2, 2013. REUTERS/Brian Snyder

James Bullard, President of the St. Louis Federal Reserve Bank, speaks during an interview with Reuters in Boston, Massachusetts August 2, 2013.

Credit: Reuters/Brian Snyder

WASHINGTON (Reuters) - U.S. labor market conditions are improving and the Federal Reserve should base future policy decisions on this view, a top Fed official said on Wednesday.

St. Louis Fed President James Bullard said despite a debate among economists about the drivers behind the recent fall in the U.S. jobless rate, he still saw the headline unemployment rate as a good indicator of overall labor market health.

"In particular, the recent, relatively rapid declines in unemployment can be understood as representing an improving labor market," he said in remarks prepared for delivery to the Exchequer Club.

"This is the judgment that should inform monetary policy going forward."

Bullard, a centrist who does not vote on policy this year, did not discuss the concrete outlook for Fed asset purchases or monetary policy in his remarks.

The Fed has begun to cut back its asset buying with the aim of winding these up next year, shifting much of the focus on future policy moves to interest rates.

The U.S. central bank has said it expects not to raise benchmark rates until well after the unemployment rate falls below 6.5 percent, especially if inflation remains below target.

For some time, the Fed has said it would be appropriate to keep rates exceptionally low at least as long as the jobless rate stayed above that level.

The jobless rate fell to a new five-year low of 6.6 percent in January but a drop in the number of Americans working or looking for work has sparked a debate about whether the Fed is linking policy moves to the right indicators.

The participation rate remains near a 35-year low at 63.0 percent, which some argue is due to demographic factors such as an ageing population and others see as a reflection of business cycle effects.

Bullard, an honorary professor of economics at Washington University in St. Louis, said he was inclined to think cyclical components were less important in driving down participation, but more research was needed on issues like how to better include household decision-making in economic models.

(Reporting by Krista Hughes; Editing by Andrea Ricci)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.