Fed sees somewhat brighter outlook for US jobs
The battered US labor market may finally be looking up, according to a report from the Federal Reserve that found modestly better job conditions across the country.
January 13, 2011 / 08:39 IST
The battered US labor market may finally be looking up, according to a report from the Federal Reserve that found modestly better job conditions across the country.
The Fed's Beige Book, based on anecdotal reports from the business contacts of the central bank's regional branches, painted an increasingly bright, if cautious, picture.The findings were consistent with a recent pick-up in US economic data that has prompted some economists to beef up their forecasts for growth in the first half of 2011."All district reports indicated that employment levels are rising in at least some sectors, generally by modest amounts," the Fed said. Manufacturing also appeared to be doing well.Still, caution was still prevalent among many businesses and the US housing sector remains in a rut, the Fed said.Mortgage applications, import prices up The latest data offered some modest encouragement on that front, with applications for US home mortgages rising as lending rates eased from recent highs.The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity rose 2.2% last week to its highest level in about a month.It had dropped on a lull in refinancing activity as influential US Treasury yields soared in late 2010.The Fed's report also chronicled increased price pressures for businesses, but little evidence that these were being passed on to consumers.Those findings echoed data on import prices, which jumped 1.1% in December following a revised 1.5% increase in November. Prices were up 4.8% last year, according to the Labor Department.Petroleum import prices climbed 3.9% in December, while non-petroleum costs rose just 0.4%. Export prices advanced 0.7% after a 1.5% gain in November. They were up 6.5% in 2010, the biggest gain in records dating back to 1983, and nearly double the rise in 2009.A low inflation environment in the United States has allowed the Federal Reserve to maintain a very loose monetary policy, but a recent spike in global energy and commodity prices has raised some concern about cost pressures.One big reason for tame price growth has been the weakness in the housing market, which some economists worry will take an extended period to recover.The US economy grew 2.6% in the third quarter, a level considered too meek to put a significant dent in the nation's 9.4% jobless rate.Against that backdrop, the Fed announced in November it would buy an additional USD 600 billion in bonds over an eight month period in order to support the recovery by keeping long-term borrowing costs low.Market interest rates have risen sharply since then despite the purchases, though policymakers have argued they might have risen even further without Fed action.The improvement in conditions in the Beige Book report strengthens the case, made both by some top Fed officials and outside economists, that the latest round of bond-buying might not be necessary.Fed Chairman Ben Bernanke, however, has argued the economy is running so far beneath its full potential that it continues to need help from the monetary authorities. The central bank has cited both weak employment conditions and very low inflation readings to justify its actions. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
