US economy readings have been “mixed” – Federal Reserve Chair

NEW YORK, March 29 (KUNA) — Federal Reserve Chair said today that readings on the US economy since the turn of the year have been somewhat mixed, confirming many indicators have been quite favorable.
Speaking at the Economic Club of New York, Federal Reserve Chairwoman Janet Yellen said hat labor market has added an average of almost 230,000 jobs a month over the past three months. In addition, the unemployment rate has edged down further, more people are joining the workforce as the prospects for finding jobs have improved, and the employment-to-population ratio has increased by almost 0.5 percentage point.
“Consumer spending appears to be expanding at a moderate pace, driven by solid income gains, improved household balance sheets, and the ongoing effects of the increases in wealth and declines in oil prices over the past few years,” she said.
After the Federal Open Market Committee (FOMC) raised in December the target range for the federal funds rate, the Federal Reserve’s main policy rate, by 0.25 percentage point, Yellen said that this small step marked the end of an extraordinary seven-year period, during which the federal funds rate was held near zero “to support the recovery from the worst financial crisis and recession since the Great Depression.” Yellen noted that the Committee’s action recognized the considerable progress that the US economy had made in restoring the jobs and incomes of millions of Americans hurt by this downturn.
Looking beyond the near term, Yellen anticipated that growth will also be supported by a lessening of some of the headwinds that continue to restrain the US economy, which include weak foreign activity, dollar appreciation, a pace of household formation that has not kept up with population and income growth and so has depressed homebuilding, and productivity growth that has been running at a slow pace by historical standards since the end of the recession.
Although the baseline outlook has changed little on balance since December, Yellen highlighted that global developments pose “ongoing risks.” These risks, she said, appear to have contributed to the financial market volatility witnessed both last summer and in recent months.
Globally speaking, the Federal Reserve head said that there is a consensus that China’s economy will slow in the coming years as it transitions away from investment toward consumption and from exports toward domestic sources of growth.
A second concern relates to the prospects for commodity prices, Yellen spoke about oil. She said in her speech that for the US, low oil prices, on net, “likely will boost spending and economic activity over the next few years because we are still a major oil importer.” But the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms, she added.
In the case of countries reliant on oil exports, the result might be a sharp cutback in government spending; for energy-related firms, it could entail significant financial strains and increased layoffs, she said. In the event oil prices were to fall again, Yellen noted that either development could have adverse spillover effects to the rest of the global economy.
After her speech at the Economic Club of New York, the USD slumped against its main rivals. The dollar fell to Yen 112.77 after the remarks, in comparison to Yen 113.46 on Monday. In addition to the pound traded at USD 1.4389, in comparison to USD 1.4259 the day before.
Yellen’s address effected US major indexes as well, as the S&P 500 and Dow Jones industrial average recovered to close at their highest levels of the year. (end)