Federal Reserve chairwoman Janet Yellen speaks with student Baker Gregory as she tours the City Colleges of Chicago ''College to Careers Programme in Advanced Manufacturing''. Photo by Reuters.
Markets are welcoming the ''fresh approach'' being taken by
new Federal Reserve chairwoman Janet Yellen as she focuses on
unemployment, Craigs Investment Partners broker Peter
Dr Yellen says the US economy still needs the Fed's
extraordinary support measures, noting that the falling
jobless rate masks weaknesses in the jobs market.
In a speech in Chicago yesterday, highlighting slack in the
labour market, Dr Yellen said the economy remained ''still
considerably short'' of the Fed's goals of maximum
sustainable employment and stable inflation.
Mr McIntyre said markets rallied after the speech because it
gave certainty to the financial markets.
''There is a growing realisation the US recovery has stalled
and Dr Yellen gave a `heads up' interest rates will reman at
zero or close to zero for the foreseeable future,'' Mr
''There is an old saying: 'Don't bet against the Fed'. If the
Fed says rates will be 0% or 0.5% it pays to take notice.''
Dr Yellen had contacted out-of-work Americans and relayed
their stories during the speech.
Mr McIntyre said the chairwoman was more outgoing than
previous chairman Ben Bernanke and it was starting to show
While she could talk to huge corporations and wade through
data, a lot of good anecdotal evidence about the ''real
situation'' could be gained off the streets.
''These are the people on the street who need to be
employed,'' he said.
Dr Yellen said in her speech while the official unemployment
rate had fallen quickly over the past two years to 6.7%, the
level remained deceptive.
She especially pointed to the high level of people unemployed
for a long term, despite the economy's rebound from the Great
''While there has been steady progress, there is also no
doubt that the economy and the job market are not back to
''The recovery still feels like a recession to many
Americans, and it also looks that way in some economic
''In some ways, the job market is tougher now than in any
recession. The numbers of people who have been trying to find
work for more than six months or more than a year are much
higher today than they ever were since records began decades
Dr Yellen emphasised even though the Fed had begun reducing
its huge bond purchase programme, the economy still needed
its support, in the way of ultra-low interest rates and Fed
programme for low-income communities.
Mr McIntyre said Dr Yellen reassured investors that the US
central bank remained committed to bolstering the US jobs
market, consumer spending, corporate investment and the
nascent housing recovery.
The comments eased concern sparked earlier this month when
she suggested US interest rates might rise as early as the
first half of 2015.
The latest clues on the US labour market will be offered in
the form of the ADP employment report tomorrow, followed by
weekly jobless claims and the Government's monthly employment
report on Friday.
In Australia, the Reserve Bank of Australia (RBA) is widely
expected to keep the cash rate at its record low of 2.5%, but
borrowers are being warned to brace for rate hikes next year.
The RBA was expected to leave the cash rate on hold for the
first half of 2014, according to 13 economists surveyed by
AAP, after its board meeting yesterday.
Westpac chief economist Bill Evans said the Australian
economy was getting stronger and the weak labour market was
expected to strengthen in 2015.