Fed’s Lockhart says job market still weak

BRASELTON, Georgia (BestGrowthStock) – U.S. employment figures issued on Friday, which showed weaker private-sector job creation than many analysts expected, point to a soft labor market, Atlanta Federal Reserve President Dennis Lockhart said.

The U.S. economy added 431,000 new jobs in May, but much of it was temporary hires for the U.S. Census. The unemployment rate dipped but remained elevated, at 9.7 percent.

“My overall sense is it suggests a continuing weak employment market,” he told reporters after speaking before the Alabama Bankers Association.

He predicted it would take a long time for unemployment to come down significantly, saying it might not dip below 9 percent until the end of 2011.

Against that backdrop, Lockhart said he was not prepared to say the economy was ready to withstand immediate interest rate increases, as suggested by fellow regional Fed president Thomas Hoenig at the Kansas City Fed.

“I am not prepared to go as far as my colleague,” he said.

Still, he added that a renewed contraction in the economy or “double-dip” recession was unlikely.

On Thursday, Lockhart argued that the Fed should begin to start thinking about raising interest rates as the economy recovers.

In response to the worst financial crisis in generations, the Fed not only slashed official borrowing costs close to zero but also undertook a wide array of emergency lending measures.

Asked whether the Fed’s ultra-low rates policy could lead to the formation of bubbles, a concern most often expressed by Hoenig at the Kansas City Fed, Lockhart said he did not see any immediate evidence of that.

“I wouldn’t completely rule it out,” Lockhart said. “It’s hard to identify any specific areas where financial imbalances are evident,” he said.

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Fed’s Lockhart says job market still weak