The Federal Reserve’s monetary policy will continue to be “accommodative” until the labor market improves, Chicago Fed President Charlie Evans said.
“We’re going to keep policy low until the unemployment rate is 6.5 percent,” he told CNBC. “I … think that 6.5 percent unemployment isn’t going to be achieved until about the middle of 2015."
He also provided a target for 7 percent unemployment by the end of 2014. The rate was last reported at 7.9 percent.
Evans was reminded that in October he discussed job growth of 200,000 per month over a six-month period.
“I think that’s a good benchmark, I think that’s completely achievable,” Evans told CNBC. “The last three months have averaged 200,000 on payrolls. We need month after month of 200,000. For six months that would be good. But we also need growth above potential that reinforces that labor market improvement.”
The number of Americans filing new claims for unemployment benefits fell last week and a trend reading hit a near five-year low, Reuters reported.
The Labor Department said initial claims for benefits dropped by 5,000 to a seasonally adjusted 366,000.
The downward trend in layoffs suggests the economy is strong enough that employers will add workers.
Claims have trended lower in recent weeks and are around their lowest levels since the early days of the 2007-09 recession, according to Reuters.
The four-week moving average for new claims, a gauge of the trend in layoffs, dropped 2,250 to 350,500. That was the lowest level since March 2008.
Evans cited improvement in the economy, including increasing auto sales and improvement in the housing sector. He is looking for 2.5 percent growth this year.
“I think the unemployment rate came down a little more quickly in the last year than we had thought,” Evans told CNBC. “I think once we start getting growth clearly above trend, quarter after quarter, the unemployment rate is going to move down. People will start coming back into the labor force.”
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