PHILADELPHIA, Oct 13 (Reuters) - The U.S. economy is doing “pretty well” and has a strong labor market, Philadelphia Fed President Patrick Harker said on Thursday.
Harker, who does not have a vote on monetary policy this year but will in 2017, did not say how close the U.S. central bank might be to raising interest rates.
But he said the U.S. labor market had largely recovered from the 2007-09 recession even if it faces longer-term challenges due to the drop in the share of Americans who want to work.
“Despite frequent talk about a sub-par economy, we’re actually doing pretty well,” Harker said in prepared remarks before the World Affairs Council in Philadelphia.
Harker said on Sept 29 he thought the economy would likely warrant an interest rate increase at its last policy meeting of the year in December. The Fed last raised rates in December 2015 and minutes from its most recent meeting in September showed several voting policymakers judged a rate hike would be warranted “relatively soon” if the U.S. economy continued to strengthen.
The Fed also has a policy meeting scheduled for Nov. 1-2, but investors see little chance of a hike then given its proximity to the Nov. 8 U.S. presidential election. Harker said the Fed was not affected by election cycles and politics never plays a role in its discussions.
“The fact is that we have a strong labor market,” he said on Thursday, pointing to the country’s 5 percent jobless rate.
But he also noted that future economic growth could be weighed down by the long-term drop in America’s so-called labor force participation rate, which is the share of the working-age population with a job or looking for one.
It could also make living standards advance at a slower pace by slowing growth in the average amount of output each worker produces per hour, he said. That makes for a less dynamic economy and suggests the Fed will have to keep interest rates lower on average than in the past.
“That’s important because it gives us less room to maneuver,” he said. (Reporting by Jason Lange; Editing by Chizu Nomiyama)