Next Federal Reserve chairman must strongly support central bank's dual mandate, president says, and right now that means boosting employment. Also this week: jobless claims rise, credit card debt falls, and drama unfolds at J.C. Penney.
Pablo Martinez Monsivais/AP
Obama addresses options for Fed chairman: The priority for the central bank must be unemployment, President Obama said in a press conference Friday. In picking the next chairman of the Federal Reserve, the main objective is to find someone who will support the Fed's dual mandate of fighting inflation while pushing for full employment, he said. Those policies are often at odds. At the moment, the focus should be on job creation, Mr. Obama addes. "Right now, if you look at the biggest challenge we have, the challenge is not inflation. The challenge is we've still got too many people out of work, too many long-term unemployed."
The president mentioned two leading candidates by name – former Treasury Secretary Lawrence Summers and current Fed Vice Chairman Janet Yellen – but added that he was also considering other highly qualified people. He said he'd make a decision this fall. Obama went to some length to dispel the notion that Mr. Summers has the inside track, saying that in earlier comments he was simply defending his former Treasury secretary from preemptive attacks. If the president is strongly inclined to have the Fed boost employment despite risks of inflation, Ms. Yellen would seem the more natural choice, since she is considered more dovish than Summers and would be likely to keep interest rates low for a longer period of time. However, the president seemed less familiar with her, referring to her at one point as "Mr. Yellen" before correcting himself.
The term for current chairman Ben Bernanke ends in January.
JOLTS Improve, but hiring weakens: 3.96 million job openings were available in June, according the the US Labor Department’s monthly Job Openings and Labor Turnover Survey (JOLTS). That was above the 3.85 million analysts expected, and layoffs declined by 215,000. But hiring continued to lag, falling by 289,000, its sharpest drop in three years. “As a result, the hiring rate (hiring as a percentage of total employment) was down by two-tenths to 3.1 percent and has barely recovered since the early stages of the recovery,” Barclays Research economist Peter Newland wrote in an e-mailed analysis. “We believe that this divergence between openings and hiring is consistent with our view that some of the loss of employment during the recession was structural, rather than purely cyclical, in nature.”
Credit card debt falls, but student loan and auto debt swell: According to June’s consumer credit report, US households paid down credit card debt from May but accumulated more in student and auto loans. Excluding mortgages, total consumer credit increased $13.8 billion to $2.85 trillion in June. Revolving credit (debt with non-fixed payments like credit cards) fell by $2.7 billion after increasing $6.4 billion in May. Non-revolving credit, meanwhile, had its largest increase since February, jumping $16.5 billion to $1.99 trillion. Analysts predict that revolving credit will pick up in the coming weeks as back to school shopping gets under way.
Jobless claims tick up: The number of people applying for unemployment benefits for the first time increased by 5,000 last week to 333,000 claims. But the bigger news was good: The four-week moving average hit a post-recession low, falling by 6,000 claims to 336,000. "In our view, the downward trend in jobless claims is evidence that the separations side of the labor market has been steadily recovering in recent years, despite a more sluggish recovery on the hiring side.” Barclays Research economist Cooper Howes wrote via e-mailed analysis.
Drama at J.C. Penney: Things are getting testy among top brass at floundering department store chain J.C. Penney. Thursday, the retailer’s top shareholder, billionaire hedge fund manager Bill Ackman, released a letter urging J.C. Penney’s board to speed up its search for a replacement for interim CEO Mike Ullman. He offered up yet another former CEO, Allen Questrom, as a suggestion, and J.C. Penney’s stock price surged 8 percent on the news.
The company’s board was less than pleased, firing back with its own letter saying it “strongly disagrees” with Mr. Ackman and calling his actions "disruptive and counterproductive."
It’s been a miserable year for J.C. Penney, which may be running out of time to turn around its fortunes. The company stock price has fallen 36 percent since January, and Mr. Ullman’s replacement would be the retailer’s third CEO since April.