Weak Jobs Report Could Spur Easing: Kroszner

Federal Reserve Board Chairman Ben Bernanke testifies during a hearing before the Senate Budget Committee February 7, 2012 on Capitol Hill in Washington, DC.
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A weaker-than-expected U.S. employment report could increase pressure on the Federal Reserve to undertake a third round of quantitative easing, former Fed Governor Randy Kroszner said Friday.

“I think there will be some pressure, but I think the key what are they going to do that really is going to make a difference to spur job growth,” he said on CNBC’s “The Kudlow Report.”

The specter of deflation remained a concern and will likely draw the Fed’s attention, but QE3 might not necessarily help the jobless rate.

“I think trying to make promises that more Fed easing could actually create jobs, that may be a bridge too far,” he said.

The U.S. Bureau of Labor Statistics reported that the economy added 69,000 new jobs in May, missing economist estimates of 158,000 new positions. The jobless rate rose for the first time in nearly a year, to 8.2 percent.

Labor force participation remained near 30-year lows though incrementally better than last month, rising to 63.8 percent. The unemployment rate that counts discouraged workers rose as well, swelling to 14.8 percent form 14.5 percent in April.

Kroszner, a professor of economics at the Booth School of Business of the University of Chicago, also pointed out that in addition to the lackluster labor report, the global economy was facing potential drags from the euro crisis and China slowing down.

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“The Fed’s done a lot, they’ve tried to take out the tail risk of deflation. It’s much harder to do the positive to get job growth spurred,” he said, adding that he could not predict with certainty what Federal Reserve Chairman Ben Bernanke would do.

“We might get some hints when Ben Bernanke testifies next week,” he said.

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