US Fed chair “cautiously optimistic” despite “disappointing” US labour data

WASHINGTON, June 6 (KUNA) — Federal Reserve Chair Janet Yellen said on Monday that the recent US labour market report was “disappointing” but she remains “cautiously optimistic” for the future.
The recovery after the economic crisis has “not always been smooth,” Yellen said in a speech at a non-profit organization event held in Philadelphia, “but overall, the gains have been impressive,” particularly in regards to the job market.
Yellen revealed that a drop in the May unemployment rate “occurred not because more people had jobs but because fewer people reported that they were actively seeking work.” Meanwhile, recent signs of a slowdown in job creation are due to inflation being lower than the Fed’s objective of 2 percent, she said, adding “I expect it to move up over time.” On the future outlook, Yellen suggested “good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.” She expected the economic expansion to continue, with the labor market improving further and GDP growing moderately – with inflation moving up to 2 percent over the next couple of years.
The increase in employment over the past several years has contributed to higher household incomes and strengthening consumer confidence, Yellen said.
“Rising equity and house prices have helped restore households’ wealth,” she said, while “the fall in oil prices has supported household purchasing power as well.” According to “simple calculations,” she said the “average household has gained some USD 1,300 in purchasing power since mid-2014 from the fall in gasoline prices.” Due to these factors, consumer spending continues to grow at a “solid rate” and the housing sector continues to make “further progress,” she said.
“Both home sales and construction have been gradually improving, and residential investment made a noticeable contribution to GDP growth over the past year,” said Yellen.
However, she suggested that progress toward US goals and the appropriate stance of monetary policy will depend on how “uncertainties” like the economic situation in Europe and China, US productivity and the price of oil will evolve. (end) sd.ibi