Bernanke Not Satisfied With Jobless Rate, Says Economy Needs To Grow Faster

Although most economic indicators suggest that the U.S. economy is indeed improving, Federal Reserve Chairman Ben Bernanke is not satisfied. In a speech to the National Association of Business Economics on Monday, the Fed Chairman reminded the audience that the Fed needs to see more progress on the employment front.

In what sounded like both a defense of the Fed’s current ultra easy monetary policy and perhaps the groundwork for additional policy action, Bernanke said that the U.S. economy needs to grow at a faster pace in order to reduce the unemployment rate in the country.

“A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed,” Bernanke said in his speech. “Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force.”

Up until this morning, stock market investors had all but given up on the idea of the Fed providing any additional help to the economy. Given that inflation is rising and the economic data has been largely better than expected, traders assumed the Fed was now on the sidelines.

However, the triple digit gain by the DJIA at the open Monday suggests that investors have put some form of QE3 (“sterilized,” “twisted,” or otherwise) back on the table.

”He defended Fed policy, leaving without question the door open to QE3, if not in April, then in June,” said Tony Crescenzi, a portfolio manager a bond giant PIMCO. “Clearly, Bernanke still has an easing bias. This emphasis on long term unemployment shows it.”

Bernanke said that he is encouraged by the reversal in the unemployment rate. He added that drop in the unemployment rate to 8.3% in February from the 9.1% level seen last summer was positive. However, the Fed Chairman still believes that the decline in the jobless rate was “somewhat out of sync” with the modest economic recovery.

"To the extent that this reversal has been complete, further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies," Bernanke said.

So, does this mean that QE3 is back on the table or was the Fed Chairman merely defending the current monetary policy? It looks like all eyes will once again be on Gentle Ben when the Fed meets in April.

Be sure to let us know what you think Ben Bernanke is up to in the comments section below. 

Remember, you are in control your email alerts! You can receive alerts for more than 25 free research report alerts including: The “10.0” Report, The Insiders Report, ETF Leaders Report, and The Focus List.