Gaining a full understanding of how job market dynamics have been affected by the COVID-19 pandemic will take some time, Federal Reserve Chair Jerome Powell said on Wednesday.
Powell, speaking at a press conference after the Fed’s latest policy meeting, said this summer’s wave of infections from the Delta variant disrupted what had been a robust pace of recovery in the job market and upended expectations for large job gains to persist as enhanced jobless benefits expired and schools reopened this fall.
“There’s room for a whole lot of humility here as we try to think about what maximum employment would be,” Powell said.
People continue to stay out of the job market in part due to COVID-19, care taking responsibilities, and concerns about the virus, he said, and it could take some time to see a fuller recovery in employment and labor market participation.
The pre-pandemic labor market may not be the best standard to use when assessing what maximum employment could look like, given changes in consumer preferences and other surprises in the way the economy behaved during the pandemic, Powell said.
Officials need to see how the economy evolves in a world where there is not a new increase in coronavirus infections, he said.
“It’s a different world in so many ways, and we’re very open to that,” he said.
One thing is clear: the economy is not yet at maximum employment, meaning it is not yet time to raise interest rates, Powell said. But the labor market could reach full employment by the second half of next year if it continues to improve at the same pace seen over the last year, he added.
Policymakers will be watching employment levels, labor force participation, wages and quit rates, among other indicators, to make a judgment on the labor market, Powell said.
“The learning for those of us who lived through the last cycle is that over time you can get to places that didn’t look possible,” Powell said.
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