Janet Yellen still sees slack in US jobs market

Washington: Federal Reserve Chair Janet Yellen said Wednesday that she still sees slack in the US jobs market but that continued moderate economic growth over the next few years should eliminate it.

But with the Fed weighing its first interest rate increase in nine years, Yellen also warned that waiting too long to raise rates from the current near-zero level could pose risks to the economy and financial markets.

In a speech to the Economic Club of Washington just two weeks before the Fed weighs a much-awaited interest rate hike, Yellen said she sees a "significant" number of people who would take jobs if they were available and pay were stronger.

That and a large number of people working only part time represent continuing weakness that has prevented the labor market from reaching full employment which, along with stable prices, is the Fed`s dual mandate.

Even so, Yellen said she expects the jobs market to continue to tighten, and that inflation will pick up, to support tightening monetary policy in the near future.

"I anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labor market slack, and a rise in inflation to our two percent objective," she said in prepared remarks.

At the same time, even if those goals are not likely to be quickly attained, Yellen warned that waiting too long to begin raising rates has its own risks.

If the Fed waits too long, she said, "we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals."

"Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession."