Ben S. Bernanke, the Federal Reserve chairman, cites increased home and car sales as evidence that asset purchases are working.  The share of American adults with jobs has hovered around 58.5 percent for more than three years, roughly five percentage points below its prerecession peak.  Job creation has merely kept pace with population growth. The unemployment rate, now 7.6 percent, has fallen mostly because people stopped looking for work.  There is little sign, however, that Fed officials are considering an expansion of their four-year-old stimulus campaign as the Fed’s policy-making committee prepares to convene Tuesday and Wednesday in Washington.  “We are seeing an impact from our policies,” Eric S. Rosengren, the Federal Reserve Bank of Boston president, said in a recent interview. But “I think we’re pushing the interest-sensitive sector about as far as we’re going to be able to push it at this time.”  Fed officials backed away from talk of an early retreat from the current program of asset purchases — $85 billion a month in Treasury and mortgage-backed securities — after economic growth and inflation both rose more slowly than expected in the first quarter.  The Fed’s preferred inflation gauge rose 1.2 percent, below its 2 percent target. But that is as far as the pendulum has swung.  The Fed chairman, Ben S. Bernanke, and his allies point to increased sales of homes and autos and the rising stock market as evidence that the asset purchases are working. “After reviewing the efficacy and costs of this program, I have concluded that the efficacy has been as high or higher than I expected at the onset of the program and the costs the same or lower,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a recent speech.  But there are several reasons officials remain reluctant to do more. The benefits of additional asset purchases appear modest, at best. The consequences of buying more bonds are uncertain. And officials are frustrated that their monetary policy is being forced to play a role that most economists and Fed officials say could be more easily and effectively performed by fiscal policy.  Another reason the Fed is not embracing new measures is that it already has tied the duration of low interest rates to the unemployment rate. The Fed said in December that it intended to hold interest rates near zero at least as long as the unemployment rate remained above 6.5 percent, provided that inflation remained under control. The theory is that the economy will get as much stimulus as it needs.  “Communications from Fed leadership cast some doubt on the appetite of the key policy makers for increasing the monthly flow of purchases,” Michael Feroli, chief United States economist at JPMorgan Chase, wrote in an analysis of the coming meeting of the Federal Open Market Committee. “If the F.O.M.C. were to increase total purchases, they would prefer to do so by lengthening the time period over which they purchase $85 billion per month, rather than by increasing the monthly pace of those purchases.”  The Fed has good reasons for focusing on the unemployment rate. Historically, as people looking for jobs find work, people sitting at home start looking, so that total employment increases as the unemployment rate declines.  But recent research by two Fed economists suggests the current plan will not work if the Fed begins to reduce its efforts when unemployment falls below 6.5 percent, because that is not low enough to draw people into the job market.  The economists, Christopher J. Erceg and Andrew T. Levin, both on leave at the International Monetary Fund, calculated that the number of people who wanted jobs but were not looking now exceeded the number actively searching.  “It’s safe to ignore the participation rate during normal times,” Mr. Levin said earlier this month at a conference held by the Federal Reserve Bank of Boston, where the paper was presented. “Our message is that it may not be safe to ignore it now.”  They argued that the Fed should continue its stimulus campaign until those people were drawn back into the job market, and were able to find jobs — in other words, that the Fed should focus on employment rather than unemployment.  The implication is that the Fed should hold interest rates near zero even after the unemployment rate returns to a more normal level and even if inflation starts to rise.  Some Fed officials are skeptical of such arguments. James Bullard, president of the Federal Reserve Bank of St. Louis, warned in a presentation earlier this month that the Fed should not increase its efforts to reduce unemployment if the price is higher inflation.  “Such an approach may be highly counterproductive,” he said, citing economic simulations that yielded better outcomes when the Fed maintained its focus on stabilizing the annual rate of inflation at about 2 percent.  Fed officials raise other doubts. Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said in a recent interview that economists understood the relationship between the unemployment rate and inflation, allowing for careful calibration of Fed policy. By contrast, he noted, it would be more difficult to set a target for labor force participation because of demographic changes, like the growing share of retirees.  Still, Mr. Kocherlakota said, the 6.5 percent unemployment threshold is too high. He wants to reduce it to 5.5 percent.  Other officials say that they, too, might favor more accommodation if declines in the unemployment rate are not matched by a rising employment rate.  “We do not want to get to 6.5 percent just by having people pull out of the labor force,” Mr. Rosengren of the Boston Fed said. “We want to get to 6.5 because employment is expanding and we’re adding jobs faster than labor force growth.”
The share of Americans holding jobs has failed to improve much over the last three years, but Federal Reserve officials show little interest in expanding their stimulus campaign.