Economy Watch: Yellen Says Fed Will Stay the Course
- Feb 12, 2014
Janet Yellen, the newly minted chair of the Federal Reserve, testified for the first time in that capacity before the House Financial Services Committee on Tuesday. One of the main takeaways was that the central bank will probably continue to taper its stimulus program, despite the recent short run of disappointing employment numbers. She called the weak reports surprising, but not proof that the recovery is stalling. The Fed trimmed $10 billion off its bond buying in February, and is expected to do the same next month.
The new chair stressed “continuity.” She put it this way: “I served on the Committee as we formulated our current policy strategy and I strongly support that strategy, which is designed to fulfill the Federal Reserve’s statutory mandate of maximum employment and price stability … we have relied on two less-traditional tools — asset purchases and forward guidance — to help the economy [and] these more accommodative financial conditions support consumer spending, business investment, and housing construction, adding impetus to the recovery.”
Yellen summed up the situation at the beginning of her tenure this way, in fairly straightforward language for a central banker: “Since the financial crisis and the depths of the recession, substantial progress has been made in restoring the economy to health and in strengthening the financial system,” she said. “Still, there is more to do. Too many Americans remain unemployed, inflation remains below our longer-run objective, and the work of making the financial system more robust has not yet been completed.”
Job Openings Down Slightly
The Bureau of Labor Statistics, in its latest Job Openings and Labor Turnover Summary (JOLTS), said on Tuesday that there were 3.99 million job openings on the last business day of December, down slightly from 4.033 million at the end of November. The number of job openings was up 10.5 percent year-over-year in November, which points to a strengthening in the labor market. Job openings are at their highest level since 2005.
JOLTS also noted that the number of quits has also increased over the 12 months ending in December – from 1.727 million a year ago to 1.957 million, even though the December 2013 number was down for the month. The number of quits rose year-over-year in the private sector, but didn’t change much for government employees. Quits are voluntary separations from jobs, and a rising number of them points to rising confidence among employees in the jobs market.
Debt Ceiling Raised Again
The hubbub over the impending debt-ceiling deadline, which is at the end of February, proved anticlimactic on Tuesday, with the House of Representatives passing a measure that extends the borrowing authority of the government, no strings attached, for another year. The vote was 221-201, with 193 Democrats, along with 28 Republicans, voting for it. The Senate is expected to pass the measure as well, and President Obama will sign it.
Wall Street seemed pleased with Janet Yellen’s talk on Capitol Hill, or maybe it was the non-event of the debt ceiling, but in any case, the Dow Jones Industrial Average was up 192.98 points, or 1.22 percent. The S&P 500 gained 1.11 percent and the Nasdaq advanced 1.03 percent.