WASHINGTON - The Federal Reserve chairman, Ben S. Bernanke, said Thursday that the Fed was assessing whether the economy would continue to grow fast enough to reduce the high rate of unemployment without additional action by the central bank.
But he gave no indication that the Fed had decided to take such action.
Bernanke and other Fed officials have made clear in public appearances this week that they are troubled by the recent decline in reported job growth, the escalating crisis in Europe and the chaotic state of domestic fiscal policy.
But Bernanke told a congressional committee Thursday that the Fed had not yet concluded that growth was slowing, nor that new measures to stimulate the economy were warranted. The Fed’s policymaking committee meets in two weeks.
“Economic growth appears poised to continue at a moderate pace over coming quarters, supported in part by accommodative monetary policy,” Bernanke told the Joint Economic Committee, an assessment that on its surface was little changed from his last public remarks on the state of the economy in late April.
Beneath the surface of that forecast, however, Bernanke said the Fed was confused.
The government estimated that employers added only 69,000 jobs in May, a marked slowdown from the reported pace earlier in the year. But other economic indicators show a relatively steady, if lackluster, expansion.
Bernanke said the decline in job growth could be a quirk in the data, or it could be a warning sign. And if hiring actually is slowing, he said, “more rapid gains in economic activity will be required to achieve significant further improvement.”
That could well serve as the justification for a new round of stimulus.
“That’s the essential decision,” Bernanke said. “Will there be enough growth going forward to make material progress on the unemployment rate?”
The Fed chairman said its existing efforts to support the economy remained necessary. The central bank has held short-term interest rates near zero since late 2008, and it has said that it plans to maintain that policy until late 2014 at least.
It also has purchased more than $2 trillion in Treasury securities and mortgage securities to further reduce borrowing costs for businesses and consumers.
He also offered the standard affirmation that the Fed “remains prepared to take action as needed to protect the U.S. financial system and economy.” He noted that the risk of a European crisis, in particular, had intensified in recent weeks. Bernanke’s remarks were more cautious than a speech Wednesday by the Fed’s vice-chairwoman, Janet Yellen, who said the Fed might be justified in taking new action simply as insurance against the looming risks from Europe and elsewhere.
“It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest,” Yellen said.
Several other members of the Fed’s policymaking committee have suggested in recent days that they do not yet see sufficient reason for the Fed to take additional action, in part because the economic outlook is unusually murky.
“Our crystal balls are much cloudier than usual,” John Williams, president of the Federal Reserve Bank of San Francisco, said Wednesday.
Jobless by the numbers
New claims for unemployment benefits fell last week, the Labor Department said Thursday.
Initial jobless claims — an indicator of layoff trends — had risen for three straight weeks last month, reaching a high of 389,000 in the week ended May 26.
And sure enough, the jobs report for the month of May turned out to be every bit as gloomy, with the economy having created just 69,000 jobs and the unemployment rate rising to 8.2 percent.
But new filings for jobless benefits fell back to 377,000 in the week ended June 2, and the four-week moving average of jobless claims stood at 377,750 — just a tad higher than the previous four-week average.Tribune Washington Bureau