Federal Reserve officials talk more about how to define a fuzzy concept (maximum occupancy) that will greatly influence their thinking about how long interest rates will stay close to zero.
Favorable hiring conditions, as seen in the record levels of job openings and abandonment, suggest that “job seekers should help the economy cover the considerable remaining ground to achieve the maximum of employment, ”Fed Chairman Jerome Powell said in a speech Friday in the Kansas City Fed’s annual magazine. economic policy symposium.
Assessing maximum employment, often described as the unemployment rate consistent with stable inflation, will be a delicate task for the Fed because officials concluded, in retrospect, that they overestimated it during the previous expansion and, possibly, interest rates rose too soon.
Their deliberations now seem to be more difficult because of how the Covid-19 pandemic has raised normal economic activity, for example, making it harder to determine how many people who left the workforce last year will return.
“You still have the same challenge as last decade, in fact, a bigger challenge: determining the maximum aspect of employment due to the immense disruption of the labor market,” said Julia Coronado, economist who participated in the presentations Friday’s virtual events, where labor market dynamics were one of the main focuses.