Lacker says Fed can't ease structural joblessness
By Pedro Nicolaci da Costa
WASHINGTON (Reuters) - Further monetary stimulus would not do much for a U.S. labor market that is plagued by longer-term, structural issues like skills mismatches, Richmond Federal Reserve Bank President Jeffrey Lacker said on Monday.
Data released last week showed a still-anemic pace of employment growth, with only 115,000 jobs created in April.
Speaking before a group of business executives and community leaders, Lacker said investments in job training and education would do more for workers than any short-term stimulus.
"If elevated unemployment reflects fundamental factors rather than insufficient spending, such stimulus might have little impact on unemployment and instead just raise the risk of pushing up inflation," Lacker said.
Lacker, an inflation hawk, has dissented three times this year against the Fed's guidance that it will probably keep interest rates near zero until at least late 2014. Lacker believes rates will have to rise in the middle of next year.
He said local business contacts reinforced his sense that structural unemployment is a major part of the problem.
"Although demand is beginning to increase, (businesses) are unable to respond as quickly as they would like due to an inability to find skilled workers," he said.
In response to the deepest recession in generations, the U.S. central bank slashed interest rates to effectively zero in December 2008 and bought some $2.3 trillion in Treasury and mortgage bonds in an attempt to also push down long-term borrowing costs. Continued...