Recent Posts

Tuesday, June 5, 2012

Weak May jobs report spurs talk of new Federal Reserve stimulus measures

This could spell disaster. - Reggie

The disappointing May jobs report has set off a fresh round of speculation — and concern among Republicans — about whether the Federal Reserve will move to boost the economy.

Friday’s employment report, which found the economy added just 69,000 jobs — under half of what was expected — suggested that an already tenuous economic recovery might have lost steam.

With the Fed officially charged with maximizing employment and controlling inflation, those bleak numbers have analysts and lawmakers wondering if the central bank will act to jolt the economy.

“That’s the chatter,” said Andrew Busch of BMO Capital Markets. “At this point, they may be reassessing their outlook.”

Before Friday’s report, Fed officials indicated they were not looking to take on new initiatives.

William Dudley, the president of the New York Federal Reserve Bank and vice chairman of the Fed’s policy-setting committee, indicated Wednesday the Fed would not take more action if the economy continues a steady recovery.

“As long as the U.S. economy continues to grow sufficiently fast to cut into the nation’s unused economic resources at a meaningful pace, I think the benefits from further action are unlikely to exceed the costs,” he said.

However, he also noted further Fed easing “might be called for” if job gains are too slow. The question now is whether the May report meets that test.

Fed Chairman Ben Bernanke is likely to be tested on that front Thursday during a scheduled appearance before the Joint Economic Committee.

Republicans worry the Fed might read the report as a call to action.

“One of my fears is that the Fed feels an obligation to interject itself more into the economy, which I think is exactly the wrong thing,” said Rep. Kevin Brady (R-Texas), vice chairman of that panel. “I’m hopeful they don’t take this as a signal to intervene more.”

No comments: