Fed's Lockhard: Concern about economy and jobs are holding back growth

Dennis Lockhart isn't worried about inflation, but he understands that main street is.  He has long been a proponent of QE2, but it doesn't seem like many in the Fed are defending their actions.  He says that the fear of jobs and growth are limiting business spending and thus holding back the economy.  So, it is not the economy that sucks, it is our perception of the economy that sucks, and it is that perception that creates reality. 

Try fighting that twisted line of circular reasoning.  Via BB:

“Main Street is justifiably concerned today about the sustainability of the modest recovery that’s been under way now for six quarters, the persistence of high unemployment and the specter of inflation,” Lockhart said today in a speech in Anniston, Alabama.


Such concerns are “a heavy weight of apprehension holding back business investment, hiring, consumption, to some extent, and -- taken together -- the growth rate of the economy,” he said.

Lockhart said unemployment remains a top concern and job growth has been “frustratingly slow.”

“Improvement in the labor market has lagged broader economic recovery,” Lockhart said to the Calhoun County Chamber of Commerce. “I expect the unemployment rate to fall over the coming years, but I think it unlikely that jobs growth this year will be strong enough to generate quick improvement.”

Fed's Lacker suggests that the Fed should consider ending QE2 now that economic growth is picking up

Richmond Federal Reserve President Jeffrey Lacker thinks that the Federal Reserve should seriously reconsider its bond purchases now that the U.S. economy looks stronger. 

He also  expects the economy to expand close to 4.0% this year, lifted by robust consumer spending.

He isn't worried about inflation, but instead that the economy and money supply are overheating.  Via WSJ:

Both the Fed and private-sector economists expect the recovery, which started in June 2009, to gain momentum this year. Gross domestic product, the broadest measure of economic activity, rose at an inflation-adjusted annual rate of 3.2% in the last quarter of 2010 as consumers spent more, exports rose and companies drew down inventories. In December, Americans increased their use of credit cards for the first time since August 2008, indicating they are more confident about the economy.


Lacker said the recent decline in the savings rate suggests that many households have made substantial progress toward repairing their balance sheets following the financial crisis.

"Given these stronger fundamentals, it seems quite reasonable to project robust growth in consumer spending this year," the Fed official said.