Fed's Lacker Favors Job Training, Education Over More Stimulus
First Published Tuesday, 8th May 2012 01:54 am - © 2012 Dow Jones
--Latest jobs report didn't change view of economy
--Stimulus might have little impact on unemployment, raise risk of higher inflation
--High unemployment rate reflects mismatch between workers' skills and job openings
--US unemployment rate 8.1% in April
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By Jeffrey Sparshott
Of Dow Jones NEWSWIRES
GREENSBORO, N.C. -(Dow Jones)- A new round of stimulus from the U.S. central bank risks higher inflation and is likely to have little impact on unemployment, a Federal Reserve official said Monday.
"Additional fillips of aggregate spending are unlikely to be an effective policy response" to elevated unemployment, Federal Reserve Bank of Richmond President Jeffrey Lacker said in remarks to local business executives and community leaders.
Lacker's comments follow Friday's jobs report, which showed U.S. job growth slowed again in April and more Americans dropped out of the workforce. Nonfarm payrolls grew by 115,000 last month, while the unemployment rate ticked down a tenth of percentage point to 8.1%, according to Labor Department data.
Lacker said the latest report hasn't altered his view of the economy--growth is likely to come in between 2.5% and 3% for the year.
"My outlook will change as the data comes in for sure," Lacker said. "That employment report didn't really change my outlook that much."
Lacker was the only one of the 10 voting members of the Fed's policy-making committee last week to oppose the group's decision to reaffirm its plans to keep short-term interest rates near zero until late 2014.
The high unemployment rate, Lacker said, stems in part from a mismatch between workers' skills and job openings. To help fill a shortage of skilled labor, he favors job training and education programs.
"I believe such investments are likely to yield greater benefits for both workers and the economy as a whole than efforts aimed at providing short-term stimulus. As I have noted, improvement in the skill level of the workforce eventually leads to both higher productivity and wages," Lacker said.
Lacker, who will meet with Guilford Technical Community College students Tuesday to talk about education, highlighted community college programs that teach skills demanded by local companies.
Such retraining won't offer a quick fix for the economy, Lacker acknowledged.
Federal Reserve officials have said they expect only gradual improvement in the labor market the rest of this year. The Fed last month forecast that the unemployment rate would fall to somewhere between 7.8% and 8% by the end of 2012.
The Fed's policy-making committee on in April reiterated its plan to keep its easy-money policy in place until late 2014. Meanwhile, the central bank's $400 billion bond-buying program, meant to reduce long-term interest rates, ends next month.
If the labor market stalls, the Fed could reconsider measures to stimulate the economy.
Lacker seems unlikely to support further bond buying.
"If elevated unemployment reflects largely fundamental factors rather than insufficient spending, such stimulus might have little impact on unemployment and instead just raise the risk of pushing inflation up," he said.
-By Jeffrey Sparshott; Dow Jones Newswires; 202-862-9291; firstname.lastname@example.org