Bernanke's stimulus spurring employment in housing

, Bloomberg


Ben S. Bernanke

Federal Reserve Chairman Ben S. Bernanke has something to tout before Congress in hearings this week: job growth in the auto and housing industries.

Consumers rely on loans to buy cars and homes, so these segments of the economy are among the most responsive to Bernanke's strategy of holding interest rates low and pressing on with bond purchases of $85 billion a month.

"The rate-sensitive sectors, most notably housing and autos, are kicking into a higher gear," said Mark Zandi, chief economist for Moody's Analytics Inc. in West Chester, Pennsylvania. "This reflects the Fed's aggressive monetary policy and resulting rock-bottom interest rates," along with "working off the excesses of the boom and bubble."

Bernanke and his colleagues on the Federal Open Market Committee have pledged to continue buying bonds until the labor market improves "substantially." Climbing employment in construction and vehicle manufacturing bolsters the case that asset purchases can help spur the improvement.

Zandi predicts total job growth this year of "close to 2 million," about the same as last year. "But I expect closer to 3 million more jobs in 2014 and the same in 2015." Much of the increase will come from "more housing construction, consumer spending driven in part by rising house prices and more auto production."

Refinancing Boom

Southeast Mortgage of Georgia Inc., headquartered in Lawrenceville, Georgia, plans to add as many as 50 full-time employees this year to its existing work force of 125 people to handle a growing volume of business, said Cal Haupt, president and chief executive officer. Haupt, 49, sees loans originated or refinanced by his company climbing 30 percent this year from $425 million last year.

"I don't fight the Fed," Haupt said. "I will sit in their wake and enjoy the rise."

The average fixed rate on a 30-year mortgage loan was 3.56 percent as of Feb. 21, after falling as low as 3.31 percent Nov. 22, according to data from McLean, Virginia-based Freddie Mac.

Bernanke has kept the target for the federal funds rate near zero since December 2008. The FOMC said two months ago, and repeated in January, that an "exceptionally low range" will be appropriate as long as inflation isn't forecast to rise above 2.5 percent and unemployment remains above 6.5 percent.

Unemployment was 7.9 percent in January, and the Fed's preferred price measure, issued by the Commerce Department and tied to consumer spending, rose 1.3 percent for the 12 months through December.

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