In a speech to the Long Island Association, Federal Reserve Bank of New York President William Dudley cautioned audience members against being overly optimistic regarding the economic recovery. One of his main concerns was elevated gas prices, stating that elevated commodity prices could have an adverse effect on already fickle consumer spending. Additionally, he noted that recent gains in the overall employment rate cannot solely be contributed to the economic recovery, but also to a drop in the labor force participation rate, saying that “had the labor force participation rate not declined from around 66 percent in mid-2008 to under 64 percent in February, the unemployment rate would still be over 10 percent.”
Dudley also left the door open for expanded Federal Reserve intervention to inspire further economic growth, claiming “nothing has been decided” by the FOMC in terms of further bond-buying programs. Dudley’s speech was not all pessimistic, however, as he highlighted his “cautious optimism” regarding the Eurozone crisis and his expectation that inflation will continue to “moderate”. Though the speech was hardly an enthusiastic confirmation of sustained economic improvement, it appears that the major drags on the economic recovery are beginning to be resolved and the outlook can remain positive and hopeful moving forward.