Ben Bernanke says the job market isn't as strong as the steadily declining unemployment rate might suggest.
Responding to questions at a Senate hearing Tuesday, he noted that the unemployment rate doesn't capture the plight of millions of people who have stopped looking for work or part-timers who can't find full-time jobs.
His cautious view helps explain why the Federal Reserve plans to hold interest rates at record lows until late 2014. Many economists were looking to see if Bernanke might waver on that stance after Friday's news that hiring surged in January and the unemployment rate to a three-year low of 8.3 percent.
The Fed chairman stuck with the three-year time line.
None of the senators asked Bernanke whether the encouraging job figures were reason enough for the Fed to rethink holding interest rates low for that long. And Bernanke didn't tout the hiring data during the two-hour hearing.
If anything, Bernanke maintained the Fed's position: the economy is improving at a frustratingly slow pace and that low rates are necessary to boost growth.
Bernanke agreed with Sen. John Cornyn, R-Texas, that an unemployment rate of 8.3 percent is understating the jobs problem.
"It's very important to look not just at the unemployment rate, which reflects only people who are actively seeking work," Bernanke said.
"There are also a lot of people who are either out of the labor force because they don't think they can find work. ... There are also a lot of people who are working part-time, and they'd like to be working full-time but they can't find full-time work."
The Fed has kept its benchmark interest rate near zero for the past three years. In its policy statement in January, the Fed said it would probably not increase that rate until late 2014 at the earliest _ a year and a half later than it had previously said.
During the hearing, Republicans repeated familiar concerns. They said keeping rates down could raise the risk of inflation. And low rates punish traditional savers.
Sen. Pat Toomey, R-Penn., acknowledged that the Fed has a dual mandate, to both lower unemployment and keep inflation from rising too quickly. But he questioned whether the Fed's priorities were right, given that unemployment is expected to stay high for several years.
"You have this tension between these two simultaneous objectives," Toomey said. He suggested the Fed focus on a single mandate of keeping inflation low.
Bernanke said Fed officials were aware of the risks and were closely monitoring inflation, which he said was low and falling.
The Fed last month set an annual inflation target of 2 percent. Inflation in October-December quarter was below that target.
"Given that inflation is close to target, I don't think we would be doing radically different things at this point in time with a single mandate," Bernanke said.
On Friday, the government said employers added 243,000 jobs in January, far more than expected. And unemployment fell for a fifth straight month, to 8.3 percent. Still, 8.3 percent is still painfully high. Nearly 13 million people remain unemployed.
Much of the hearing focused on the nation's high budget deficits. Bernanke urged senators to resolve debates over tax cuts that expire this month and at the end of the year, saying uncertainty around both could slow the economy.
Bernanke told senators that he agrees with an analysis by the Congressional Budget Office that growth would slow to 1.1 percent next year if the so-called Bush tax cuts expire. He also said the economy would be hampered if a Social Security tax cut expires at the end of this month.
The tax cuts hinge on a debate over trimming the federal deficit, which is projected to run above $1 trillion for the fourth straight year. Democrats want to increase taxes on the wealthy. Republicans oppose that approach and want to focus on spending cuts.