(MENAFN– ecpulse) Not forgetting last week week`s jobs report that came out mixed as it showed that nonfarm payrolls in the U.S were lower than estimated in January in an after-holiday cutback and as government hiring also fell the most in a year.
Employment increased by 113,000 in January, following a revised gain of 75,000 the month before. Analysts had expected a gain of 185,000.
However on the other hand unemployment rate surprisingly cheerfully fell to 6.6 percent in January.
Now going back to the new Chairman speech, she took some time to appreciate the previous Chairman, Ben Bernanke , and pledged to go on with his contributions that had helped improve the economy and made the financial system stronger, and that he made sure the Federal Reserve is transparent and accountable.
In the text of the testimony to the House Financial Services Committee, Yellen said that while growth is gaining momentum, “the recovery in the labor market is far from complete.”
“I am committed to achieving both parts of our dual mandate: helping the economy to return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.”
“My colleagues on the FOMC and I anticipate that economic activity and employment will expand at a moderate pace this year and next, the unemployment rate will continue to decline toward its longer-run sustainable level, and inflation will move back toward 2 percent over coming years.”
Yellen said the unemployment rate alone isn’t an adequate gauge of labor-market health .
“Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high,” she said.
“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market.”
Yellen, 67, delivered her first public remarks as Fed chairman as policy makers pursue plans to gradually scale back the unprecedented bond-purchase program she helped put in place.
“We have been watching closely the recent volatility in global financial markets,” the Chairman said. Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook. We will, of course, continue to monitor the situation.
On the asset purchases program, the Chairman added that “If incoming information broadly supports the Committee`s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings.”
“That said, purchases are not on a preset course , and the Committee`s decisions about their pace will remain contingent on its outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.”
The central bank has said it will keep buying bonds until the outlook for the labor market has “improved substantially.” Fed policy makers have also sought to reassure investors that while they are tapering bond purchases, they still intend to hold the Fed’s target rate near a record low.
Inflation is projected to be no more than a half percentage point above our 2 percent longer-run goal, and longer-term inflation expectations remain well anchored. Crossing one of these thresholds will not automatically prompt an increase in the federal funds rate, but will instead indicate only that it had become appropriate for the Committee to consider whether the broader economic outlook would justify such an increase.
The FOMC doesn’t meet again until March 18-19. By then, it will have an additional month of economic data, including the jobs report for February.
As for the financial system, Yellen said the Fed is keen to add more strength to it, with the use of regulatory reforms and supervisory actions.
In October, the Federal Reserve Board proposed a rule to strengthen the liquidity positions of large and internationally active financial institutions. 1
“Together with other federal agencies, the Board also issued a final rule implementing the Volcker rule, which prohibits banking firms from engaging in short-term proprietary trading of certain financial instruments”
On the supervisory front, the next round of annual capital stress tests of the largest 30 bank holding companies is under way, and we expect to report results in March, the statement text showed.
Yellen took over as Fed chairman on Feb. 3 after serving for three years as Bernanke’s deputy. She has supported the bond purchases that expanded the Fed’s balance sheet to a record $4.1 trillion, and she helped craft a communications strategy designed to shape expectations for the future path of interest rates.
Furthermore this week a report showed that the retail sales in the U.S. decreased at the slowest rate in 10 months in January, while jobless claims increased, as harsh weather conditions kept consumers at bay from shops and showrooms.
Retail sales slid 0.4 percent in January from December, according to data by the U.S. Commerce Department released Thursday.
Nine of the 13 major categories studied show a decline in January, led by auto dealers, sporting goods stories and apparel outlets.
Excluding the large automotive sector , retail sales were flat. Retail sales account for about one-third of consumer spending in the U.S.
January brought its coldest weather in three years, with snowfall around four times above normal, according to weather-statistics provider Planalytics Inc.
A separate report showed jobless claims rose by 8,000 last week to 339,000, according to data by the U.S. Labor Department. Analysts had expected a slight fall to 330,000.
The four-week moving average was 334,000, a rise of 250 from the previous week’s revised average of 333,750.
This week the new Federal Reserve Chief; Janet Yellen, whom spoke to the American public this past Tuesday and affirmed that the U.S. labor market needs more work to be restored to full health.
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