Fed's Powell: 'Still far from a strong job market'
Fed Chair Powell issues warning on the job market
Federal Reserve Chair Jerome Powell, in prepared remarks to the Economic Club of New York on Wednesday, warned the U.S. job market is fragile, noting that the employment picture remains worse than at the worst point of the Great Recession.
US ECONOMY ADDED JUST 49,000 JOBS LAST MONTH
In January, the U.S. economy created just 49,000 jobs – and has yet to recover around 10 million jobs that were lost during the pandemic.
Powell cautioned the unemployment rate, which dipped to 6.3% last month, may actually be closer to 10%. The headline number, the Fed chair said, “dramatically understates” the breakdown of conditions in the labor market.
On the bright side, the number of permanent job losses are believed to be fewer than what was experienced during the financial crisis, according to Powell, and the Paycheck Protection Program has played an important part in keeping workers employed at America’s small businesses.
FED CHAIR POWELL DOWNPLAYS HEAT IN HOUSING MARKET AS PRICES CLIMB
Powell said he believes the risks to the U.S. economic outlook are to the downside and include things like a slower-than-expected coronavirus vaccine rollout and more negative news about mutated virus strains.
And as lawmakers consider the terms – and cost – of another stimulus package, Powell also said the U.S. federal budget deficit is on an unsustainable path, as it has been for years, but now is not the time to remedy that issue. Rather, policymakers should address the deficit when employment and U.S. economic growth are strong.
In terms of the Fed’s balance sheet, Powell said it would remain whatever size it needs to be in order to support the economic recovery.
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During its most recent two-day policy meeting, the FOMC said it planned to hold the benchmark federal funds rate near 0% as it pledged to utilize all of the tools at its disposal to support the U.S. economic recovery. It will also continue to purchase bonds at a rate of $120 billion per month.
On Wednesday, Powell said the Fed was not going to tighten monetary policy in response to strong data from the labor market alone.
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