WASHINGTON (AP) -- Federal Reserve officials at their last meeting expressed concerns that the weakening job market might hold back the economic recovery.
Fed officials said they expected the economy would pick up in the second half of the year after slowing this spring. But the outlook for both employment and inflation were unusually uncertain, given the sluggish growth and a jump in energy prices this year.
The minutes cover the Fed’s June 21-22 meeting. At that meeting, the central bank lowered its economic forecast but kept a pledge to leave interest rates at exceptionally low levels for an extended period.
“The recent deterioration in labor market conditions was a particular concern ... because the prospects for job growth were seen as an important source of uncertainty in the economic outlook,” the minutes read.
Fed policymakers met shortly after the government released its May employment report. Last week the government offered an even gloomier report for June.
The economy added just 18,000 jobs last month, the fewest in nine months. And the May data were revised downward to show just 25,000 jobs added - fewer than half of what was initially reported. The unemployment rate rose to 9.2 percent, the highest rate this year.
Companies have pulled back sharply on hiring after adding an average of 215,000 jobs per month from February through April. The economy typically needs to add 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate.
After last month’s meeting, the Fed said in its policy statement that the economy had slowed, in part, because of higher energy prices and supply-chain disruptions caused by the Japan earthquake and tsunami.
But at a news conference after the meeting, Fed Chairman Ben Bernanke acknowledged that some of the economy’s problems are more long-lasting and go beyond temporary shocks. Bernanke is scheduled to give his semiannual economic report to Congress this week.
The Fed cut its forecast for economic growth for this year to a range of 2.7 percent to 2.9 percent. It had previously expected the economy to grow 3.1 percent to 3.3 percent this year. The Fed also said unemployment would stay higher than it had expected earlier.
The economy grew at a weak 2 percent pace in the first half of this year, analysts say. It was expected to improve to a 3.2 percent pace in final six months of the year, according to an Associated Press survey of 38 economists. But the latest employment report has cast doubt on those forecasts. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate.
The Fed stuck to its plan to bring an end this month to a program to help the economy by buying $600 billion in government bonds. The Fed also intends to keep short-term interest rates near zero “for an extended period,” a phrase it has been using the past two years. Though the central bank noted that inflation has risen, it expects that to be temporary as well.
Many economists say they don’t expect the Fed will raise interest rates until next summer at the earliest. And some think the Fed will wait until 2013, based on the weak economy.