US Federal Reserve Chairman Ben Bernanke says the US job market isn’t as strong as the steadily declining unemployment rate might suggest.
Responding to questions at a Senate hearing on Tuesday, he said the unemployment rate doesn’t capture the plight of millions of Americans who have stopped looking for work or part-timers who can’t find full-time jobs.
His cautious view helps explain why the Federal Reserve plans to hold interest rates at record lows until late 2014.
Many economists were looking to see if Bernanke might waver on that stance after Friday’s news that hiring surged last month and the unemployment rate to a three-year low of 8.3 percent.
The Fed chairman stuck with the three-year time line.
None of the senators asked Bernanke whether the encouraging job figures were reason enough for the Fed to rethink holding interest rates low for that long.
And Bernanke didn’t tout the hiring data during the two-hour hearing.
If anything, Bernanke maintained the Fed’s position: The economy is improving at a frustratingly slow pace and that low rates are necessary to boost growth.
Bernanke agreed with Republican Senator John Cornyn that an unemployment rate of 8.3 percent is understating the jobs problem.
“It’s very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” he said.
“There are also a lot of people who are either out of the labor force because they don’t think they can find work … There are also a lot of people who are working part-time, and they’d like to be working full-time, but they can’t find full-time work,” he said.
The Fed has kept its benchmark interest rate near zero for the past three years.
In its policy statement last month, the Fed said it would probably not increase that rate until late 2014 at the earliest — a year and a half later than it had previously said.
During the hearing, Republicans repeated familiar concerns.
They said keeping rates down could raise the risk of inflation. And low rates punish traditional savers.
Bernanke said Fed officials were aware of the risks and were closely monitoring inflation, which he said was low and falling.
The Fed last month set an annual inflation target of 2 percent. Inflation in the October-December quarter last year was below that target.
“Given that inflation is close to target, I don’t think we would be doing radically different things at this point in time with a single mandate,” Bernanke said.
On Friday, the government said employers added 243,000 jobs last month, far more than expected. And unemployment fell for a fifth straight month, to 8.3 percent. Still, 8.3 percent is still painfully high. Nearly 13 million people remain unemployed.
Much of the hearing focused on the nation’s high budget deficits. Bernanke urged senators to resolve debates over tax cuts that expire this month and at the end of the year, saying uncertainty around both could slow the economy.