On Wednesday, Federal Reserve Chairman Jerome Powell gave a strict overview of the state of employment in the United States, saying aggressive policy support is needed to address the myriad of problems workers still face. .
Addressing the problem will require a “patiently accommodative monetary policy that includes lessons from the past” in terms of the benefits that low interest rates bring to the labor market, the head of the central bank told the New York Economic Club.
Although the economy has recovered more than 12 million jobs since the early days of the Covid pandemic, Powell said the United States is “very far” from where it should be in terms of employment .
“To fully realize the benefits of a strong job market will need continued support from both short-term policy and long-term investments so that all job seekers have the skills and opportunities that will allow them to contribute and share. -the benefits of prosperity, “he said in prepared statements.
The pace of job creation has slowed considerably.
While the unemployment rate has fallen from 14.8% to 6.3% in 2020, non-farm payrolls rose just 49,000 in January and fell 227,000 in December. More than 10 million workers remain unemployed, 4.4 million more than before the pandemic a year ago.
Powell further said the main unemployment rate has “dramatically underestimated” the real damage, including the largest 12-month drop in labor participation since at least 1948.
Without the misclassification errors that have plagued the Department of Labor since the pandemic began in March, the unemployment rate would have approached 10 percent, Powell added. He also noted that the impact has been especially heavy on lower workers, with lower quartile occupancy falling 17% during the coronavirus crisis, while the upper level has experienced a 4% decline.
“Despite the astonishing speed of recovery at first, we are still a long way from a strong labor market whose benefits are generally shared,” Powell said.
To address the disparities, the Fed six months ago adjusted its full employment approach to make it a “broad and inclusive” target and said it would not begin raising interest rates until meet this goal. The main focus is the desire to allow inflation to fall slightly above the Fed’s standard 2% price stability target.
Powell noted that in the last years of the record expansion that ended a year ago, wage and labor earnings began to be more evenly distributed as the unemployment rate fell, without the threat of inflation. high. When the unemployment rate fell in the past, the Fed would raise rates as a way to fight inflation, but now it won’t.
The Fed keeps its benchmark short-term lending index anchored near zero and buys at least $ 120 billion in bonds each month.
While he said he is confident the Fed’s new approach will lead to better results, he said monetary policy alone cannot do it all.
“Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and maintaining maximum employment will require a monetary policy rather than solidarity. A commitment will be required to all society, with input from the entire government and the private sector, ”he said.
Powell added that mass vaccinations will help, as well as tax programs such as the Wage Protection Program, which provides loans to companies that retain workers.