Ben Bernanke, chairman of the US Federal Reserve, yesterday warned there was no choice but to stick to his plan for a $600bn (£386bn) stimulus to the struggling economy, dubbed QE2.
Giving testimony to Congress just hours after the publication of more disappointing data on jobs, Mr Bernanke said the US economy was not picking up speed quickly enough for the Fed to end its second round of quantitative easing early.
Though Mr Bernanke's QE2 programme remains unpopular with many Republicans, he said monetary policy had to be kept loose to stimulate growth. "The pace of economic recovery seems likely to be moderately stronger in 2011 than it was in 2010," he said. "A self-sustaining recovery in consumer and business spending may be taking hold [but] conditions in the labour market have improved only modestly at best."
The key non-farm payrolls data published by the US Labour Department yesterday showed that the unemployment rate has now fallen to 9.4 per cent, the lowest level since May 2009. However, far fewer jobs were created last month than was expected: economists had anticipated a figure as high as 175,000, while the actual figure was 103,000.
The picture on unemployment remains confused, with other data this week giving a more positive signal, but Paul Dales, senior US economist at Capital Economics, described yesterday's figures as "very disappointing". Julia Coronado, chief economist for North America at BNP Paribas, added: "The economy is adding workers but there are no reliable signs that the pace of hiring is improving."
The latest setback will also disappoint President Obama's administration, which has been criticised for engineering a "jobless recovery", in which the return to growth has not been accompanied by a pick-up in the employment market.
Mr Bernanke warned that "it could take four or five years for the job market to normalise fully".Reuse content