By Pedro da Costa and Ann Saphir
OXFORD, Miss./LOS ANGELES (Reuters) - Despite signs of improvement in the U.S. labor market, there is plenty of room for the jobless rate to fall further, Federal Reserve Chairman Ben Bernanke and two other top policymakers said on Friday, in comments that suggested continued support for the U.S. central bank's massive stimulus program.
The three spoke at separate events on the same day that the U.S. Labor Department reported surprisingly strong jobs growth in October, though they all cautioned about drawing conclusions from economic data.
Bernanke said he still sees an "awful lot of slack" in the labor market, while saying that economic data does not do a good job of providing an accurate measure.
Bernanke was not specifically referring to the latest employment report, which showed the unemployment rate rose to 7.3 percent in October while employers added 204,000 jobs, well above what economists had expected.
Dennis Lockhart, president of the Atlanta Fed, and John Williams, president of the San Francisco Fed, said they were encouraged by the October job gains, but they warned against reading too much into one month of data.
Still, Lockhart said he would not rule out paring back the Fed's massive stimulus program before the end of the year, suggesting that whether the Fed can safely cut its $85 billion-a-month in bond purchases will be hotly debated when Fed policymakers next meet, in December.
Asked about the chance of a December decision to scale back stimulus, Lockhart said: "Speaking for myself, I would not take off the table at least consideration at that time."
Williams, speaking to reporters in Los Angeles, declined to put a timeline on when he would expect the Fed to start withdrawing stimulus.
Both Lockhart and Williams are centrists who do not vote on the Fed's policy-setting panel this year. Bernanke's term as chief of the Fed expires at the end of January. The U.S. central bank has said it will continue buying bonds until it sees substantial improvement in the job market outlook.
Lockhart told reporters that data leading up to the Fed's meeting on December 17-18 would likely be "noisy."
"This is a period in which there are a lot of unusual things going on," he said. "So for that reason, I would be a little reticent to draw up very profound conclusions from one month's positive jobs number."
Williams likewise said he does not want to be swayed by a single data point, however positive.
"We are going to keep watching the data, to see whether we are seeing a significant improvement in the labor market, see whether we are seeing self-sustaining momentum in the economy," he said.
Unemployment is still far too high and inflation is lower than the Fed's 2 percent target, he said.
"We still have a ways to go," he said, but "we are making progress." The Fed should not withdraw stimulus until it is sure the economy is able to keep growing without it, he said.
In response to a severe financial crisis and deep recession, the Fed has slashed rates to effectively zero and has bought over $3 trillion in mortgage and government bonds to lower long-term borrowing costs and boost growth.
The U.S. economy has been dampened by budget battles in Congress that have led to tighter fiscal policy despite a falling budget deficit, economists say. This austerity has been one reason why the Fed has kept its stimulus in place for longer than it might have liked.
Williams on Friday blamed some of the slow recovery on tight fiscal policy, which he said has chopped about 1.5 percentage points from growth this year.
The Fed's mandate calls for maximum employment, stable prices, and moderate long-term interest rates. Annual inflation was 0.9 percent in September, according to the Fed's preferred measure of price pressures.
An increasing number of big U.S. banks now see the Federal Reserve scaling back its economic stimulus program before March in the wake of October's stronger-than-expected jobs numbers and other recent data pointing to an economy that may be on a firmer footing, a Reuters poll on Friday showed.
Just two weeks ago, a similar poll found the majority of primary dealers - the large financial institutions that do business directly with the Fed - expected the central bank would not start cutting its monthly bond purchases before March of next year.
(Additional reporting by Alister Bull and Chris Reese; Editing by Leslie Adler)