Bernanke: Job Market Weak Despite Gains

Fed Chairman Ben Bernanke says the apparent strengthening of the job market as indicated by the improvement in the jobless rate for the past three months may be attributed more to how many jobs were cut in 2008 than to a definitive strengthening of the job market currently. Speaking at the National Association for Business Economics in Arlington, VA, Bernanke said a more robust consumer demand will be needed before more substantive job gains materialize. In fact, the Fed Chairman indicated that he does not expect unemployment to fall at the pace of the last three months in lieu of stronger economic growth. He noted that the pace of unemployment reduction is something that would normally be produced by a GDP annual growth of 4 percent. Given that GDP saw growth of less than 2 percent in 2011, the Chairman believes recent growth in monthly employment is attributed to the fact that employment cuts at the onset of the crisis in 2008 were more drastic than needed. He noted that Unemployment at that time grew far more than the amount GDP shrunk. The other side of this mismatch, he believes, is at play currently. With these remarks, Bernanke is telegraphing a continuation of his dovish intents at keeping rates at their current lows for the entire duration of the Fed's stated 2014 deadline. Today's remarks offer insights on why the Fed had stuck to its cautionary outlook at a time of ebullience in the markets. An average of 245,000 jobs added monthly from December through February had fueled hopes the economy was turning the page in a definitive way. Economists and analysts will probe today's remarks to assess the chance of a new round of quantitative easing from the Fed. Bernanke's remarks are causing a down-spike on the dollar. Gold is trading higher this mornings as well, following the remarks.