WASHINGTON (TheStreet) -- Federal Reserve Chairwoman Janet Yellen's testimony Tuesday on Capitol Hill provided few surprises, but there were a few comments worth noting that caught the attention of investors.
In her question and answer session with Democratic and Republican members of the House Financial Services Committee, Yellen delivered a familiar speech on the central bank's monetary policy, but she also shed some newsy light on recent weakness in monthly jobs reports, so-called tapering and the labor force participation rate.
The first thing we learned is that when asked about the two most recent jobs reports, Yellen admitted that she was surprised the pace of job creation during December and January was running under what she anticipated.
This has been a concern among investors the past month as the Fed's economic stimulus program heavily relies on U.S. labor data. Simply, softening jobs reports leads market participants to broadly interpret, first, that the economic recovery may be slowing, and, second, that this would force the central bank to remain highly accommodative (purchasing longer-term Treasuries and mortgage-backed securities) to support the economy.
The Fed, though, since December has started to pull back its monthly asset purchases as a signal that it believes the economy is improving meaningfully enough that it can expand without the central bank's help. In December, the Federal Open Market Committee announced the central bank would scale back asset purchases by $10 billion, and by another $10 billion in January to put monthly buying at $65 billion.
We also learned that when asked what it would take for the Fed to pause tapering of its monetary stimulus program, Yellen said there would need to be a "noticeable change" in economic outlook. The chairwoman's decision not to specifically quantify what would trigger a pause is calculated to keep markets somewhat uncertain. In other words, one bad economic report won't necessarily convince the market that the Fed will fundamentally shift its monetary policy.