Federal Reserve Chairman Ben Bernanke has expressed deep worry over the US economy and unemployment, sending a strong signal he wants the central bank to take fresh action to stimulate growth.
Warning that stagnation in the labour market was "a grave concern," Bernanke defended the Fed's interventions of the past four years and signalled he would be pushing for more help for the economy when the Fed's policy board meets in 12 days.
"The economic situation is obviously far from satisfactory," he said on Friday in the keynote speech of the Fed's annual conference of central bankers in Jackson Hole, Wyoming.
"Growth in recent quarters has been tepid, and so, not surprisingly, we have seen no net improvement in the unemployment rate since January," he said.
"Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum employment for some time."
Bernanke made clear the jobless rate, stuck around 8.3 per cent, the sharp fall in labour market participation in the past four years, and long-term joblessness are some of his biggest worries.
"The stagnation of the labour market in particular is a grave concern, not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years," he said.
In a firm statement, Bernanke said the Fed would take additional action "as needed" to strengthen growth and boost job creation.
Markets liked the news, with oil prices climbing steadily and the S&P 500 index ending 0.51 per cent higher.
Bond prices climbed sharply too, with the yield on the 10-year Treasury bond falling to 1.56 per cent from 1.62 per cent Thursday.
Bernanke, whose easy money policies have been criticised by conservative politicians including Republican presidential candidate Mitt Romney, delivered a lengthy defence of the Fed's actions since the financial crisis.
He said that efforts to drive down long-term interest rates through "quantitative easing" (QE) bond purchase operations and other programs had boosted economic output by three per cent and added more than two million jobs "relative to what otherwise would have occurred.
He warned, as he has over much of the past year, that Fed action is not a panacea for policy action from political leaders.
Economists said Bernanke's comments raised the likelihood that he could garner support for fresh action in the Federal Open Market Committee's September 12-13 meeting - whether more firm signalling of Fed intent on keeping interest rates low over the next few years, or a third QE program.
"The Fed chairman's Jackson Hole speech was clearly consistent with more Fed easing, although not definitive," said Jim O'Sullivan of High Frequency Economics.
Not all were as bullish, noting the resistance to a QE3 in the FOMC and the still-mixed signals from data.
Moreover, a QE3 launch risks political fallout as the battle for the White House, largely focused on the economy under President Barack Obama, intensifies ahead of the November 6 vote.
Obama's rival Romney said last week he disapproved of the Fed's recent work and he would seek to replace Bernanke if he wins the presidency.