U.S. Federal Reserve Chair Jerome Powell, citing the country's push after World War Two to find jobs for returning soldiers, on Wednesday called for a broad national effort to get Americans back to work after the pandemic, particularly minorities and workers ousted from lower-paying jobs.
"Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy," Powell said in remarks to the Economic Club of New York. "It will require a society-wide commitment, with contributions from across government and the private sector."
Recovery, Powell said, would require both "near-term policy and longer-run investments" to ensure anyone who wants a job can get one.
While the Fed has already promised that borrowing costs for companies and households will be kept low as the economy recovers, the scope and tenor of Powell's remarks align closely with the sort of ambitious spending proposals being discussed by President Joe Biden and Treasury Secretary and former Fed Chair Janet Yellen.
Biden is urging Congress to pass a $1.9 trillion emergency spending bill, and is planning a longer-term infrastructure effort that some analysts expect will involve trillions of dollars more.
Powell, in keeping with longstanding Fed tradition, did not comment directly on those proposals, the province of the elected officials who wield taxing and spending authority.
But in wide-ranging remarks during a question-and-answer session, Powell said he felt the country needed a more organized and directed strategy to meet its economic potential - an argument similar to that made by the current administration as it organizes its investment and spending plans, and considers major programs for example to lower carbon emissions.
Again referencing the national effort mobilized in wartime or for projects like the moon landing, backed by federal spending for basic science and research, Powell said "it would be great if we had a national strategy to make the U.S. economy as big, and to make the prosperity the U.S. has as broadly shared, as possible."
HAPPY AT WORK
Powell is currently in the last year of a four-year term as Fed chair, and it will be up to Biden to decide in coming months whether to reappoint him or not.
Prompted by a question Powell said without flinching "I love my job," and arguably there is much for the current White House to love about how Powell has positioned monetary policy. Appointed by former President Donald Trump but also a frequent target of Trump's ire, Powell has recast Fed policy over the past year to put more emphasis on achieving "maximum employment" and has downplayed the inflation risks that preoccupied his predecessors
The United States remains about 9 million jobs short of where it was a year ago, and the recovery has been most sluggish for members of minority groups and those thrown out of lower- paying service jobs in sectors like leisure and hospitality hard hit by the pandemic.
"The Fed is almost demanding that Congress and the private sector step up and help the sluggish employment backdrop we’re seeing," said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
Financial markets were little changed after Powell's comments.
Though the Fed has no direct say over how the federal government spends money or how much it raises, central bank policy does influence the interest rate the government pays and thus the cost particularly of longer-term investments.
During the pandemic, Fed policymakers have generally set concerns about the level of federal debt to the side and focused more on the economy's immediate needs.
Powell on Wednesday cemented that stance, noting that after World War Two, as the economy transitioned from wartime and needed to absorb millions of returning soldiers into the labor force, the Employment Act of 1946 committed the government "to use all practicable means" to see that anyone willing and able to work can find "useful employment."
"At present, we are a long way from such a labor market," he said.
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