Federal Reserve Chairman Jerome Powell on Wednesday painted a dour picture of the U.S. state of employment, saying continued aggressive policy support is needed to rectify the many issues still facing workers.
Addressing the issue will require a “patient, monetary policy that incorporates lessons from the past” in terms of the benefits of low interest rates to the labor market, said the central bank to the New York Economic Club.
Even though the economy has recovered more than 12 million jobs since the early days of Covid’s pandemic, Powell said the US is “far” from where it needs to be in terms of employment.
“Fully realizing the benefits of a strong labor market will provide ongoing support from both near-term policy and longer-term investments so that all jobseekers have the skills and opportunities that enable them add to and share the benefits. of success, “he said in prepared remarks.
The pace of job creation has become very slow.
While the unemployment rate has fallen from its 2020 high of 14.8% to 6.3%, nonfarm payrolls rose just 49,000 in January and fell 227,000 in December. More than 10 million workers are still out of work – 4.4 million more than before the pandemic a year ago.
Powell also said the primary unemployment rate has “been” significantly “severely damaged, including the largest 12-month decline in labor force participation since at least 1948 .
Without misclassification errors that have plagued the Labor Department since the pandemic began in March, the unemployment rate would be closer to 10%, Powell said. He also noted that the impact has been particularly severe on lower earners, with employment among the lower quartile falling 17% during the coronavirus crisis, while the series highest has seen a decline of just 4%.
“Despite the remarkable pace of early delivery, we are still a long way from a strong labor market with shared benefits in general,” said Powell.
To address the inequalities, the Fed six months ago changed its approach to full earnings to make it a “broad and inclusive” goal and said it would not start raising interest rates until to achieve that goal. At the heart of the approach is a willingness to allow inflation to run slightly warmer than the Fed’s usual 2% target for price stability.
Powell noted that in the last years of the highest expansion that ended a year ago, wages and employment benefits began to be more evenly distributed while the unemployment rate fell, without the threat of inflation high. When the unemployment rate fell in the past, the Fed would walk rates as a way to stop inflation, but it will not do so now.
The Fed maintains its short-term loan rate at anchor close to zero and buys at least $ 120 billion of bonds per month.
While he said he is confident that Fed ‘s new approach will yield better results, he said money policy alone cannot do everything.
“Given the number of people who have lost their jobs and the likelihood that some will find it difficult to find work in the post-pandemic economy, more of a supportive monetary policy will be needed to achieve and sustain It requires commitment across society, with grants from across government and the private sector, “he said.
Powell said major vaccines will help in addition to fiscal programs like the Paycheck Protection Program, which provides loans to businesses that keep employees.