Federal Reserve Chair Janet Yellen said United States labor markets are far from healthy and signaled the Fed will keep monetary policy loose until hiring and wage data show the effects of the financial crisis are "completely gone," according to The Associated Press.
Despite strong recent jobs reports and other signs of continuing recovery, Yellen said in testimony to the Senate Banking Committee that she won't conclude the economy has recovered until wages start rising and discouraged workers return to the labor force, the AP reported.
In its latest semiannual report to Congress, the Fed did cite unease about some aspects of U.S. securities markets, taking the unusual step of singling out biotechnology and social media stocks for their "stretched" valuations, according to the AP.
Yellen's overall testimony and an accompanying written report to Congress said asset values were in line with "historic norms," and that the economy would continue to grow if supported by the Fed's current low interest rates, the AP reported.
Yellen said the one thing that might prompt the central bank to raise rates earlier or faster is if hiring and wages take off in an unexpected way, according to the AP.
"While we are making progress in the labor market we have not achieved our goal," Yellen told the committee, the AP reported. "There have been substantial headwinds holding the recovery back ... Until they are completely gone it calls for an accommodative monetary policy."
Wage increases "have been nonexistent," she added, "We have seen a steady shift of national income from labor to capital, and there is room for wage gains before we are worried" about inflation.
U.S. stock markets dipped after the release of Yellen's testimony and the accompanying report, as investors assessed whether her comments about specific stock sectors, according to the AP.
