Federal Reserve Chair Janet Yellen held her first public speech since her appointment two months ago, at the annual National Interagency Community Reinvestment Conference in Chicago. Although the US unemployment rate has dropped from a recent high of 10 percent (2009) to 6.7 percent (last month), the drop is due in part to many Americans who have given up the search for work. This idea has more hawkish Fed officials arguing that it shouldn’t keep up its stimulus program. But Yellen, as did Bernancke before her, believes things are working, Or at least going in the right direction. But Yellen does caution that QE (Quantitative Easing) is only one of the tools in the Fed’s belt–and that you can’t fix everything with it. There are hammers, and there are screwdrivers, after all.
In her speech “What the Federal Reserve is Doing to Promote a Stronger Job Market,” chairwoman Yellen said: “To the extent that people who desire to work lack the skills that employers are demanding, there is less slack in the labor market. This is an example of what economists call “structural” unemployment, and it can be difficult to solve. Even understanding what workers need to appeal to employers is difficult in a fast-changing economy. For government, effective solutions for structural unemployment, beginning with improved education, tend to be expensive and take a long time to work. The problem goes deeper than simply a lack of jobs.”
Janet Yellen’s full speech is available, here.