When: Today, Friday, December 2nd at 8AM ET

Where: CNBC's "Squawk Box"

Following is the unofficial transcript of a FIRST ON CNBC interview with Federal Reserve Bank of Philadelphia President Charles Plosser today, Friday, December 2nd at 8AM ET on CNBC's "Squawk Box" (M-F, 6-9AM ET).

All references must be sourced to CNBC.

Philly Fed President: Debt & Jobs


STEVE LIESMAN: Andrew, thank you very much. I'm here at the Philadelphia Federal Reserve Bank-- for their annual conference here on debts, Fiscal Policy and Monetary Policy, a really timely conference. Let me bring in our special guest, Philadelphia Federal Reserve president Charlie Plosser. Charlie, thanks for joining us.

CHARLES PLOSSER: Glad to be here, Steve. Glad your here as well.

STEVE LIESMAN: It's a great agenda. Let's talk though about what's happening in the next 25 minutes. There's going to be a jobs report. And you're pretty well known for saying, "You know what? Don't take a single report and make policy off of it."


STEVE LIESMAN: So give me your general impression. You don't know what the number's going to be.

CHARLES PLOSSER: I have no idea.

STEVE LIESMAN: Give me your general impression of the jobs market right now?

CHARLES PLOSSER: Well, I think the jobs market is still a very disappointing aspect of the overall economy. We all would like to see unemployment rates falling faster. There's still a very weak employment picture. However, there have been positive signs over the course of the fall. Many of the numbers that we thought were very weak in August and September have been revised up. The claims numbers in general have been drifting downward.

So I think there's some positive indicator that the market is-- certainly not falling off a cliff and maybe showing some signs of strengthening or at least stabilizing. So there are some encouraging signs. But it's still a very difficult job market.

STEVE LIESMAN: We had the opportunity to talk in August and you were one of the few voices out there saying we were not falling off a cliff. That things were going to get better. Does it look like we've moved away from recession?

CHARLES PLOSSER: Oh absolutely. I think at least for the time being. I didn't see a recession, I didn’t see the falling off the cliff in September or August and I don't see that now. Obviously there's some big tail risks out there. Events could happen and overtake the economy, but right now in terms of as far as the economy is, I don't see the underlying domestic economy is headed towards recession. I see some steady growth and improvement, the sort of moderate recovery story still seems at play for the basic economy.

STEVE LIESMAN: A lot of your colleagues though seem unhappy with even that forecast. That presumably the 2.5% to 3% growth picture is not enough. It's not going to bring down the unemployment rates fast enough. And they want to do more. Where do you stand on that debate?

CHARLES PLOSSER: Well, that's very a difficult debate to have, because we don't know what the economy in some sense is actually capable of in the near term in terms of growth rates. And whether monetary policy is the appropriate tool to do something with that then.

If the slowness of the growth has something to do with structural unemployment of various kinds or mismatches as people have talked about, or whether it has to do with-- uncertainty about fiscal policies, both here in in Europe, for example, then it may not be that monetary policy can do much about that. We may need to be looking at different types of solutions. So it depends on what you think is holding the economy back.

STEVE LIESMAN: Is it safe to say that you're a guy who-- if we had a clear and present deflationary threat, if it looked clear to you that there was a recession in the cards, that you would not be opposed to the Fed coming in and doing more?

CHARLES PLOSSER: No, I think you would have to calibrate what-- you'd have to sort of understand what the nature of the shock is. But I've said on several occasions that if something to happen in the financial markets and we were to ha-- we were to have another implosion-- where the Fed had to come in and support the payment system and the financial system-- to keep from melting down in some sense, it would be appropriate for us to act.

Or if we say severe risk to the deflation that would be-- may-- call for some action. Now it depends on what we thought it was and how serious it was. But that may call for some action to defend-- in my mind, defend our inflation objectives.

STEVE LIESMAN: Does that suggest to you that there's a danger in operating now or doing some okay QE3 right now, because then you don't have any powder left for when there's a real threat like when you are talking about.

CHARLES PLOSSER: Some people say we don't have much powder left already, but I think—but I think the answer to that is, yes. I think you take policy actions because-- not because you can but because it's matched to some event or some shock or some objective that you have.

Just taking policy because you can take policy is not a good way to conduct policy. One of my complaints about our actions in August and September was that we didn't conduct policy on a systematic way. We described policy in '09 as being dependent on inflation -- inflation, expectations of resource utilization. And yet in September and October we took easing actions when all of those numbers actually looked better than they did. So we need a more structured communications strategy about how and why we conduct policy and do what we do.

STEVE LIESMAN: I want to get to that in a second, but first I want to ask you, you've had a series of dissents against policy and then you suddenly didn't dissent. How come you didn't dissent? Are you happy with policy now?

CHARLES PLOSSER: Well, my view is about a lot of things. But I don't relitigating I make my decision on a meeting by meeting basis. If I don't like the decision, I will object to it. But I don't see any point in relitigating every decision at every meeting.

And I think it's important that the Fed have credibility about its actions. And at the last meeting I did not dissent. We did not take any action. So I didn't see any usefulness in relitigating the past decisions. I was on record as being opposed to them. But we're a committee. Committee, the majority rules. We made those decisions, so you move on.

STEVE LIESMAN: Let's go across the Atlantic to the-- what's happening over in Europe. How big a threat is that to the United States economy? To the U.S. banking system?

CHARLES PLOSSER: Well, I think that's one of the biggest threats. After all, we've got a conference here today on budget deficits and fiscal policy dangers and how they interact with monetary policy. We've got some excellent speakers and programs today. And I think if you look at the discussion from their perspective, and even from the chairman's and what the Fed has said, one of the biggest risks we face, the U.S. economy faces, how Europe will play out.

You watch the markets day-to-day and week-to-week over the last, since July sometime. It's almost, seems to be almost entirely driven by what the news from Europe today. And in fact a lot of the good news about the U.S. economy, the domestic economy, has been sort of washed away in the wild swings about the speculations about what's going to happen in Europe.

So I think Europe is a risk. I don't know how to judge that. It's adding on-- it's certainly adding uncertainty to the economy. And uncertainty can be unhealthy for the economy because it holds things back. So it's a source of uncertainty. And it can be a source of a serious tail risk. But nobody knows how that's going to play out. And so I do worry about that. But it's not something I can do anything about.

STEVE LIESMAN: But part of what you do is bank supervision. Are the banks that you supervise this-- and, broadly, your sense of the banks in the United States, are they prepared to deal with a major issues in Europe?

CHARLES PLOSSER: I think they are. The banks, the domestic banks in the United States, are in pretty good shape for the most part. They've shed a lot of their exposures to both European institutions and European sovereign debts. They're in much better shape than they were even six months ago.

And I think that's healthy for our institutions. In fact, one interpretation of what could happened in Europe is as Europe contracts, if that's what's happened, and lending contracts because-- European institutions begin to pull back-- these are opportunities for U.S. banks to go in and sort of steal market share, if you will, and be aggressive lenders if their balance sheets are in a good place.

So I think there are a lot of different ways this could play out and we just don't know which of those we are. But I think it's important also that the markets understand that we are prepared, as we did in 2008 when necessary, to provide liquidity and support to a crumbling financial system if that's required.

STEVE LIESMAN: Charlie, we get the opportunity, and we're grateful for it, to talk a couple times a year. Say the next time we talk, six months from now, is the bigger risk going to be to the upside to the economy or to the downside, would you say?

CHARLES PLOSSER: Now see, now you're talking several-- I say I don't predict more than-- things that will happen within the next two days.

STEVE LIESMAN: Right. Right.

CHARLES PLOSSER: I don't know. I think there's lots-- I think there's lots of upsides risk to the economy. And I think with the prospect of Europe getting a better handle on how it's going to resolve its fiscal issues-- not monetary issues, but fiscal issues, or perhaps how the U.S. handles its fiscal issues those could be-- as we make progress on those things, could be positives for the U.S. economy.

STEVE LIESMAN: Charlie, thanks for joining us and good luck today with the conference.

CHARLES PLOSSER: Thank you, Steve.

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