By Jonathan Spicer
April 5 The Federal Reserve should continue
buying bonds through this year due to a "scarring" of the U.S.
labor market, and even more aggressive policies may be warranted
if unemployment remains persistently high, a top Fed official
said on Friday.
As Boston Fed President Eric Rosengren took to the podium to
give a speech on the pain caused by high rates of unemployment,
fresh data showed employers added a very disappointing 88,000
jobs last month, the slowest hiring pace since last summer.
The U.S. unemployment rate ticked down to 7.6 percent from
7.7 percent in the previous month, as more people gave up the
search for work.
Rosengren, a dovish voter on the Fed's monetary policy
committee this year, highlighted the difficulties that
less-educated Americans face in the search for work in the wake
"Spells of unemployment can have a lasting impact long after
the economy recovers," Rosengren said in prepared remarks to an
early-childhood forum in Boston.
"If spells of unemployment have a persistent impact on
income, wealth and home ownership, then a more aggressive
response to persistently high unemployment rates is warranted."
Frustrated with the slow and erratic economic recovery, the
Fed has tied its $85 billion in monthly asset purchases to a
substantial improvement in the labor market outlook, and has
said it will keep interest rates near zero until unemployment
drops to 6.5 percent or so.
In recent weeks, some Fed policymakers have said they were
looking for more than 200,000 new jobs per month consistently
for them to feel comfortable the labor market is healing and the
economy will be able to avoid a mid-year pullback.
"More rapid economic growth is likely to not only reduce the
unemployment rate, but also reduce some of the collateral damage
the economy may otherwise face from the spells of long-duration
unemployment," Rosengren added.
"Continued accommodative policy, such as continuing our
asset purchase program through this year, is an appropriate
response to labor market scarring," he said.
The purchases of Treasury and mortgage bonds are meant to
spur investment, hiring and broader economic growth.
U.S. joblessness has edged lower since it soared as high as
10 percent at the tail end of the 2007-2009 recession, which was
the worst in decades. In March, the data showed the labor market
participation rate hit its lowest level since 1979.