Fed's Fisher worried about jobs, not inflation

The most urgent threat to the U.S. economy is joblessness, not inflation, but there is little more the Federal Reserve can do to help, a top Fed official, known for his hawkish views on inflation, said on Friday.

We have far too many people unemployed, and they are unemployed for too long, Dallas Fed President Richard Fisher told the Texas A&M Retailing Summit. We cannot have a pickup in consumption unless you have a prosperous people. We cannot have a pickup in prosperity unless people work.

The Fed has kept interest rates near zero since December 2008 and has signaled it will keep them there until at least mid-2013 in order to give a near faltering economy much needed support.

Last month, the central bank eased monetary policy still further, pledging to tilt its portfolio toward longer-term securities in a bid to push down longer-term interest rates and spur borrowing and spending.

Fisher dissented, along with two other Fed policy-makers at last month's meeting.

On Friday, he repeated his view that such measures are ineffective because the real problem is with tax and regulatory uncertainty.

If I believed that further monetary accommodation or fiddling with the yield curve would ignite sustainable aggregate demand, I would support it, he said. But the bar for such action remains very high for me until fiscal authorities get their act together.

U.S. employers added 103,000 new jobs last month, more than expected, although the economy still created too few positions to heal the labor market much, a government report showed on Friday.

With the U.S. unemployment rate at 9.1 percent and the number of long-term unemployed on the rise, job creation is the most urgent issue for the economy, Fisher said.

At the same time, though headline inflation has risen in recent months, data on underlying trends suggests it will gravitate toward the Fed's target of about 2 percent, he said.

Consumers are still paying down debts accumulated before the Great Recession, and any spending they are doing now is eating into their seed corn, he said, in a reference to the farming roots of his A&M audience.

I think it's going to be a very, very long haul before households are able to boost spending again.

More monetary easing is not the answer, Fisher said, repeating his long-held view:

Fiscal authorities are holding our mighty economy back.

(Reporting by Judy Wiley in Dallas; Writing by Ann Saphir in Chicago; Editing by James Dalgleish and Jan Paschal)