Tags: Fed | Lockhart | Economic | Concern | Justified

Fed’s Lockhart: Economic Concern Is ‘Justified’

Tuesday, 08 Feb 2011 01:30 PM

Federal Reserve Bank of Atlanta President Dennis Lockhart said concern that the U.S. recovery may falter is justified as hiring lags behind economic growth.

“Main Street is justifiably concerned today about the sustainability of the modest recovery that’s been under way now for six quarters, the persistence of high unemployment and the specter of inflation,” Lockhart said today in a speech in Anniston, Alabama.

Such concerns are “a heavy weight of apprehension holding back business investment, hiring, consumption, to some extent, and — taken together — the growth rate of the economy,” he said.

Fed Chairman Ben S. Bernanke said last week that the central bank needs to see faster job growth for some time before policy makers can be sure the recovery has taken hold. The central bank last month reaffirmed its plan to buy $600 billion in Treasurys through June, pushing on with record stimulus to reduce 9 percent unemployment and keep inflation from slowing.

Lockhart said unemployment remains a top concern and job growth has been “frustratingly slow.”

“Improvement in the labor market has lagged broader economic recovery,” Lockhart said to the Calhoun County Chamber of Commerce. “I expect the unemployment rate to fall over the coming years, but I think it unlikely that jobs growth this year will be strong enough to generate quick improvement.”

The overall U.S. expansion picked up at the end of last year, the Atlanta Fed president said, and “this moderate rate of growth” will probably continue this year.

Quickening Recovery

Richmond Fed President Jeffrey Lacker said in a speech today that the quickening recovery means policy makers need to take “quite seriously” their pledge to review the stimulus.

Lockhart described inflation as “tame” and below the Fed’s target of about 2 percent.

“My current projection shows underlying inflation gradually rising over the next few years, putting us back into a range consistent with the 2 percent target by 2013,” he said. “Key to the realization of this inflation forecast is that inflation expectations of the public remain well anchored.”

The Fed’s most closely watched inflation gauge, the Commerce Department’s core personal consumption expenditures price index excluding food and energy, rose 0.7 percent in December from a year earlier, the smallest advance since records began in 1959.

Lockhart, 64, a former Georgetown University professor, has led the Atlanta Fed since 2007. Fed presidents rotate voting on monetary policy with Lockhart next voting in 2012.

The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.

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Federal Reserve Bank of Atlanta President Dennis Lockhart said concern that the U.S. recovery may falter is justified as hiring lags behind economic growth. Main Street is justifiably concerned today about the sustainability of the modest recovery that s been under way...
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2011-30-08
 

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