By TraderVox.com
Ben Bernanke the Federal Reserve Chairman noted yesterday that the decline in jobless rate for the month of January has masked weaknesses in the US labor market. Bernanke told the Senate Budget Committee in Washington that the 8.3% rate was not expected until the fourth quarter and warned that this should not be taken as a show of full recovery of the US economy.
In his response to a question from one of the committee members, Bernanke said that it is important to look at other factors in the economy and not just concentrate on the unemployment rate which reflects the people who are actively seeking jobs. He added that there are other people who are out of the labor market since they do not consider themselves as qualified to get jobs.
A top US economist said that remarks by Bernanke indicate reluctance in altering the low interest rates announced last month. According to Bernanke, there has to be faster economic growth over a long period for the rates to be changed. He has also suggested that the rates would be changed if there were eminent risk of subdued inflation. According to Dean Maki, an economist at Barclays Capital Inc in US, there is indications that the Fed has not changed its stand on the economy despite the Friday’s unemployment report.
On the FED FOMC report released last month, the officials had estimated that the economy would grow to 2.7 percent this year and the unemployment rate was averaged at 8.2% and 8.5% in the 4th quarter. Bernanke conceded that some job indicators are improving and the 8.3 percent rate reported on Friday understates the weaknesses in the labor market. However, Bernanke stated that it would take several such reports for the interest rates to change. Further, he noted that the estimates by the central bank indicate that the economic growth will enable the economy to absorb new workforce entrant.
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