Federal Reserve chair Jerome Powell on Thursday said that the labor market is nowhere near a full recovery but added that he’s optimistic that hiring will pick up in the coming months—though that recovery will depend on the course of the ongoing coronavirus pandemic.
During a virtual event sponsored by the Wall Street Journal, Powell noted that hiring “really slowed down” over the winter amid a surge in coronavirus cases that prompted new business shutdowns and local lockdown measures.
Powell said that he has yet to see evidence of a major pickup in the labor market following that slump and added that as a result, it’s “not at all likely” that the United States will return to maximum employment this year.
He also emphasized that the Fed’s goal of “maximum employment” depends on more than just the employment rate, especially since so many workers have dropped out of the labor force and aren’t being counted in the government’s official unemployment tally.
Still, Powell maintained that there is room for optimism despite the risks posed by the pandemic in the near term: “There’s good reason to expect job creation to pick up in coming months,” he said.
Asked about the risks that inflation and overheating pose to the larger economy, Powell doubled down on previous statements and reiterated that the Fed does not plan to adjust its policy until it sees significant evidence of maximum employment in the labor market, among other conditions.
“It’ll take some time to get there,” he said, noting that inflation is also running well below the Fed’s 2% target.
While weekly unemployment claims are dramatically reduced from the eye-watering levels they reached in March and April last year (one week in March saw 6.9 million claims), they remain well above prepandemic levels. They clocked in last week at 745,000 on a seasonally adjusted basis, 9,000 more than the previous week, despite falling coronavirus cases and a quicker pace for vaccinations.
441 points. That’s how much the Dow Jones industrial average fell in the wake of Powell’s speech after he “failed to provide the type of reassuring comments investors were hoping for,” Vital Knowledge founder Adam Crisafulli wrote in note.
WHAT TO WATCH FOR
The Labor Department will release its monthly jobs report for February on Friday. Economists are expecting that the unemployment rate held relatively steady at around 6.3%, its January level.