Downplaying some recently released unsettling economic data, Janet Yellen, chair of the Federal Reserve Board said today she remains “cautiously optimistic” about the economy overall and expects a gradual, but continual improvement, which will lead to further increases in interest rates in the future.
Yellen made her remarks during a speech at the World Affairs Council in Philadelphia.
While the general picture of the labor market is largely positive, some people are still struggling. Unemployment rates rose more during the recession for African Americans and Hispanics than for the nation overall, and even though those rates have also come down by more during the economic expansion, unemployment remains higher for these groups. Unfortunately, those gaps have not narrowed noticeably relative to where they were before the recession. Unemployment rates for young African American and Hispanic men without a college degree remain especially high, and one important benefit from further improvement in the labor market would be increased job opportunities for these men and other groups that currently still experience high unemployment.
The fall in gasoline prices during the past two years has added $1,300 in purchasing power to each family in the United States, Yellen said. That, when coupled with continuing gains in disposable income, should continue to keep consumer spending growing at a “solid rate,” Yellen said.
When looking for areas of concern, Yellen was more worried about global issues, such as an economic slowdown in China and falling commodity prices, as well as the impacts of lower oil prices on the global energy sector.
Without coming out and saying it directly, Yellen indicated that there are increases in the fed funds target rate on the horizon, which will lead to a general rise in interest rates across the board.
The job market will continue to strengthen, Yellen expects, and the economy is already close to the Fed’s goal of “maximum employment.” Yellen did say that she, and the rest of the Fed, will keep a close eye on the labor market, to gauge whether last week’s data was a blip or an indication of a worsening trend.