Fed Governors Fretted Over Stimulus, High Unemployment

Federal Reserve officials who gathered last month agreed the economy appeared solidly on its way to recovery and gaining momentum, according to minutes from the Dec. 15-16 meeting, released Wednesday. Nevertheless, some members disagreed over the need for continuing and future stimulus.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% In the committee's discussion of monetary policy, some members expressed concern that should the economy weaken or the mortgage market deteriorate, stimulus programs might again become necessary. But at least one other member thought the Fed should trim large-scale asset purchases, the funding mechanism the central bank uses to provide stimulus, citing improved financial market conditions and economic forecasts.

Members also worried about the nation's high unemployment rate, noting that a merely moderate pace of expansion would hinder robust growth in the labor market and lead to only gradual declines in unemployment. The high number of long-term unemployed workers could also hamper gains in employment, the minutes said.

Additionally, evidence that fewer firms were hiring, combined with an "unusually large fraction" of people working part-time jobs out of necessity and other factors, led members to further conclude that the unemployment rate will likely remain high for some time.

Several members observed that November's "considerably better than anticipated" employment report was insufficient evidence that a sustained recovery was underway in the labor market. The upbeat report showed job losses fell to 11,000, while the nation's unemployment rate fell slightly to 10%. Nonetheless, the minutes said, a recent rise in temporary employment was a welcome development as it may lead to broader job growth.

As expected, the 10-member group voted last month to maintain stance on interest rates, keeping them at near-zero for the foreseeable future -- at least while unemployment remains high. Committee members, who gather eight times a year to assess the nation's economy and set monetary policy, will convene again later this month at the group's first meeting of the new year.
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