NEW YORK (Reuters) - The April jobs report was “encouraging” and reinforces the Federal Reserve’s need to raise rates another two to three more times this year to head off the growing risk that the labor market will get too hot, San Francisco Fed President John Williams said on Friday.
The U.S. economy added a robust 211,000 jobs last month while the unemployment rate fell a notch to 4.4 percent, according to the data issued by the Labor Department earlier on Friday.
Williams said chances are growing that unemployment will end the year lower than his 4.5 percent forecast. “The risks of us getting to a situation where unemployment is well below a sustainable level for a number of years are growing,” he told reporters.
Monthly U.S. job growth has averaged 185,000 so far this year, and the unemployment rate is below the 4.7 percent level that Fed policymakers see as the longer-run equilibrium.
“I think we’re in a great place, the economy is doing well, we are getting awfully close to our goals, and I think we are well positioned to continue” raising rates, Williams added.
Yet the Fed needs to see job growth slow to “a more sustainable pace over the next couple of years,” said Williams, a former top advisor to Fed Chair Janet Yellen. “An economy that overheats for too long, if we let this go too far, it creates greater risks down the road.”
Williams, who does not have a vote on the Fed’s policy committee this year under a rotation, said the pace should eventually slow to 80,000 to 100,000 new jobs per month. “I haven’t changed my views on the appropriate pace of policy,” he said of the two to three more rate hikes in 2017.
(Refiles to fix typo in sixth paragraph to change “of” to “over”)
Reporting by Jonathan Spicer; Editing by Chizu Nomiyama