The US labor market, decimated by the pandemic, is “very far” from being solid and the experience of past recessions shows that it could take “years” to return to full employment before the pandemic, a Jerome Powell, president of the American Central Bank (Fed), warned on Wednesday.
In addition to a massive vaccination campaign to end the health crisis caused by Covid-19, it will take a series of effective government measures to heal the wounds of the labor market, said Jerome Powell in a speech devoted to the labor market. employment before the Economic Club of New York.
“Despite an astonishingly rapid recovery (in spring 2020), we are still very far from a solid labor market, the benefits of which are widely shared” among the population, he said, noting that the rate of real unemployment is 10%. Official unemployment statistics showed a rate of 6.3% for the month of January.
A recovery dependent on the spread of Covid-19
Jerome Powell’s words come in the midst of a debate on the gigantic emergency plan ofto help the most vulnerable SMEs and households. In February 2020, before the pandemic spread in the United States, unemployment had fallen to its lowest level in 50 years.
Jerome Powell recalls that all categories of people, including black workers, then benefited from full employment, with increasing incomes, especially for the lowest incomes.
“The recovery always depends on the ability to control the spread of the virus,” said Jerome Powell, stressing that this required mass vaccinations in addition to “continuous vigilance” in terms of physical distancing and wearing of masks.
Unemployment that risks dragging on
While at the start of the pandemic, the increase in unemployment was almost entirely due to the loss of temporary jobs which are the ones being recreated most quickly, the persistence of the pandemic is now also affecting permanent jobs and unemployment. ‘is installed over time for millions of people.
In January, the United States had 10 million fewer jobs than in February 2020, lamented the boss of the powerful institution.
“Given the number of people who have lost their jobs and the likelihood that many will struggle to find work in the post-pandemic economy”, this will require “more than an accommodating monetary policy”, he said. he commented. “It will take a company-wide engagement, with contributions from across government and the private sector.”
However, he was careful not to comment on the relevance of the amount of the plan wanted by Joe Biden. “The question of how much to spend and what to spend on is really a question for Congress,” he said.
An accommodating policy maintained
Jerome Powell, however, tempered the risk of galloping inflation, a hypothesis raised by some economists. “Inflation has been much lower and more stable over the past three decades than before,” he said. The Fed’s “patiently accommodating monetary policy” takes this history into account, he added.
Larry Summers, former Secretary of the Treasury to Bill Clinton and chief economic adviser to Barack Obama, warned last week against “inflationary pressures unheard of in a generation” if the $ 1.9 trillion Biden plan is adopted .
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Jerome Powell has been clear: The Fed will not raise interest rates or reduce its aggressive asset purchase program – $ 120 billion per month – at the first signs of a strong labor market. The priority, according to him, is to come to the aid of the Americans, an argument also put forward by the new Biden administration in the face of criticism.