Fed’s Powell says the unemployment rate is 10% – with a major policy impact

Federal Reserve Chairman Jerome Powell has offered a sobering assessment of U.S. economic prospects of the Covid pandemic: the unemployment rate when reporting emergency-related events from the workforce is closer to 10 %.

That is in stark contrast to the official 6.3% unemployment rate reported for January and reaffirms the central bank ‘s intention to keep interest rates at zero for as long as they can see – reflecting concerns about financial market stability risks from frothy markets.

“Covid’s published unemployment rates have significantly reduced the decline in the labor market,” Powell told a webinar backed by the New York Economic Club.

Powell said the pandemic and the panic of the economy have triggered the biggest 12-month decline in labor force participation since just after World War II.

“Fear of the virus and the disappearance of employment opportunities in the most affected sectors, such as restaurants, hotels and leisure centers, have withdrawn many from the community. staff, ”Powell said.

“At the same time, meaningful education has forced many parents to leave staff to provide full-day care for their children. According to all, almost 5 million people say that the pandemic has stopped them looking for work in January. ”

He also cited a misinterpretation reported by the Labor Department that may have affected recent figures.

“Correcting this misclassification and counting those who left the workforce from February last year as unemployed would increase the unemployment rate by almost 10% in January, ”Said Powell, presenting this scary card to move his point home.

If Powell adheres to this definition of employment conditions, it could even be a long time before the Fed ‘s “further significant progress” criteria for distance buying $ 120 billion monthly bonds is met.