Excerpts from the speech by Fed Chair Janet Yellen at the Economic Club of Washington on December 2, 2015:
The U.S. economy has recovered substantially since the Great Recession. The unemployment rate, which peaked at 10 percent in October 2009, declined to 5 percent in October of this year. At that level, the unemployment rate is near the median of FOMC participants' most recent estimates of its longer-run normal level. The economy has created about 13 million jobs since the low point for employment in early 2010, and total nonfarm payrolls are now almost 4-1/2 million higher than just prior to the recession. Most recently, after a couple months of relatively modest payroll growth, employers added an estimated 271,000 jobs in October. This increase brought the average monthly gain since June to about 195,000--close to the monthly pace of around 210,000 in the first half of the year and still sufficient to be consistent with continued improvement in the labor market.
On balance, the moderate average pace of real GDP growth so far this year and over the entire expansion has been sufficient to help move the labor market closer to the FOMC's goal of maximum employment. However, less progress has been made on the second leg of our dual mandate--price stability--as inflation continues to run below the FOMC's longer-run objective of 2 percent. Overall consumer price inflation--as measured by the change in the price index for personal consumption expenditures--was only 1/4 percent over the 12 months ending in October. However, this number largely reflects the sharp fall in crude oil prices since the summer of 2014 that, in turn, has pushed down retail prices for gasoline and other consumer energy products. Because food and energy prices are volatile, it is often helpful to look at inflation excluding those two categories--known as core inflation--which is typically a better indicator of future overall inflation than recent readings of headline inflation. But core inflation--which ran at 1-1/4 percent over the 12 months ending in October--is also well below our 2 percent objective, partly reflecting the appreciation of the U.S. dollar.
Let me now turn to where I see the economy is likely headed over the next several years. To summarize, I anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labor market slack, and a rise in inflation to our 2 percent objective. I expect that the fundamental factors supporting domestic spending that I have enumerated today will continue to do so, while the drag from some of the factors that have been weighing on economic growth should begin to lessen next year. Although the economic outlook, as always, is uncertain, I currently see the risks to the outlook for economic activity and the labor market as very close to balanced.
On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labor market. And, as I have noted, continuing improvement in the labor market helps strengthen confidence that inflation will move back to our 2 percent objective over the medium term. That said, between today and the next FOMC meeting, we will receive additional data that bear on the economic outlook. These data include a range of indicators regarding the labor market, inflation, and economic activity. When my colleagues and I meet, we will assess all of the available data and their implications for the economic outlook in making our policy decision.