NY Fed's Dudley favors continuing bond buys

Federal Reserve Bank of New York president William Federal Reserve Bank of New York president William C. Dudley said Tuesday, April 16, 2013, that a slowdown in the pace of employment growth in March highlights the need for the Federal Reserve to support the economy through continued bond purchases. Photo Credit: Newsday, 2012 / John Paraskevas

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Federal Reserve Bank of New York president William C. Dudley said Tuesday a slowdown in the pace of employment growth in March highlights the need for the Federal Reserve to support the economy through continued bond purchases.

"After an encouraging pickup in the pace of job creation around the turn of the year, the employment report for March showed a gain of only 88,000 jobs," Dudley said, according to prepared remarks for a speech on Staten Island. "While I don't want to read too much into a single month's data, this underscores the need to wait and see how the economy develops before declaring victory prematurely."

In March, according to previously released Labor Department data, the unemployment rate fell to 7.6 percent, as people abandoned the labor force, but the pace of employment creation slowed from the 268,000 jobs added in February.

The slowdown, "along with the large amount of fiscal restraint hitting the economy now, makes me more cautious," Dudley said. "We have seen only a moderate improvement in labor market conditions over the past six months or so." Dudley's depiction of "moderate" labor-market improvement falls short of the "substantial" gains that Fed officials have identified as their goal for winding down their record monetary stimulus.

Separately Tuesday, Labor Department data showed U.S. prices fell in March for the first time in four months. The Consumer Price Index edged down 0.2 percent last month as gasoline prices tumbled, unwinding some of February's 0.7 percent increase. Economists had expected a flat reading.

And the Federal Reserve Tuesday said output at the nation's factories decreased 0.1 percent after advancing 0.9 percent in February. The decline was fairly broad-based, with output dropping for primary metals and electronics.

Tuesday's data, analysts said, strengthened the argument for the Federal Reserve to maintain its monetary stimulus to speed up economic growth.

Prices of Treasury 10-year notes fell for the first time in four days as investors sought higher-yielding assets amid a recovery in gold and equities, damping the refuge appeal of government debt.

Dudley, speaking at a Staten Island Chamber of Commerce breakfast, devoted about half of his remarks to a discussion of regional economic conditions, saying that some Staten Island neighborhoods are "not yet back to normal" following superstorm Sandy, which struck the region on Oct. 29.

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