Yellen optimistic about U.S. economy

PHILADELPHIA (June 7, 2016) — The current economic expansion should continue, including moderate improvements in both the Gross Domestic Product and the labor market, according to Federal Reserve Chair Janet Yellen.

“Although the economy has been affected by a mix of countervailing forces, I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones,” Ms. Yellen said June 6 at a meeting of the World Affairs Council of Philadelphia.

On the plus side, according to Ms. Yellen, the increase in employment over the last several years has raised both household incomes and consumer confidence.

“With continuing gains in disposable income and wealth, I expect consumer spending to grow at a solid rate,” she said. She said she also expected the housing market to have continued improvement, buoyed by low interest rates.

On the minus side, economic developments in China and elsewhere have restrained economic growth in the U.S., though Ms. Yellen said she believes these problems are fading.

“Concerns about slowing growth in China and falling commodity prices, which afflicted global financial markets this year and thus likely weighed on demand, appear to have eased somewhat,” she said.

Lower oil prices had a mixed effect on the U.S. economy, with harm to the U.S. energy industry offsetting the positive influence on disposable income, according to Ms. Yellen.

“New drilling and energy-sector employment have plunged, and the effects have spilled over to businesses serving the energy production sector,” she said. “But the largest declines in drilling activity are likely now behind us, and with oil prices having recovered somewhat, I expect that oil prices will become less of a factor.”