Fed officials optimistic on economy, even as employment numbers lag

Two presidents of regional Federal Reserve Banks have aired optimism about the economy in the next several years, but still expect unemployment to remain relatively high for the foreseeable future.

Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, said this week that he expects the economy to gain strength next year, but not due to any substantial gains in the employment sector.

"Remember, the economy lost more than 8 million jobs during the recession — a 6 percent decline in employment — and households lost more than $12 trillion in net worth,” he said, as reported by the Rochester Democrat and Chronicle. “So, there’s no doubt some rebalancing is necessary.”

"The unemployment rate will decline, but it will be a gradual decline. The shocks we experienced were huge, and it will take some time for the imbalances in the labor markets to be resolved," he added.

Meanwhile, Federal Reserve Bank of St. Louis President James Bullard echoed Plosser's comments on the economy in general and employment in particular.

Calling the Friday jobs report that saw unemployment increase to 9.8 percent as "disappointing," Bullard nonetheless expressed optimism about the economy in the near future.

"The jobs report was a little bit out of context from the other numbers we’ve seen on the economy which seem to indicate a little bit more strength, and in particular I think the holiday season at least so far is shaping up to be reasonably good," he told C-SPAN during an interview for its "Newsmakers" program, as reported by Bloomberg. "We know that labor markets lag the rest of the recovery, and they’re very slow to move."

The latest "beige book" released by the Fed Wednesday reported that officials from the 12 regional Fed banks reported cautious optimism about the economy in their respective areas. Anecdotally, they reported "relatively strong growth" in the manufacturing and professional sectors and a positive outlook on the holiday shopping season. However, they also found that businesses were still waiting for better indications the economy was on the upswing before engaging in significant new hiring.