Federal Reserve Board Chairman Jerome Powell said the U.S. labor market has a long way to go to meet the central bank’s maximum employment goal.
Following the announcement Wednesday (Sept. 16) that the Fed would maintain low interest rates and inflation was on track to run above its 2 percent objective, Powell said the central bank doesn’t have a specific unemployment rate goal in mind, Reuters reported.
“Maximum employment is not something that can be reduced to a number the way inflation can,” he said. “It’s a range of factors. We’re not looking at a rule. We’re looking at a judgmental assessment.”
Instead, the chairman listed several factors that must be met before the Fed would view the economy at maximum employment, and consider raising interest rates. The menu includes wage growth and jobs across races.
Still, Powell said the Fed was limited in what it can do to fulfill those goals. He said it’s up to Capitol Hill to enact measures to help disadvantaged workers get jobs or address income inequality, the news outlet reported.
“We would like to get back to a strong labor market where wages are moving up, where people can find work, where labor force participation is holding up nicely,” Powell said. “That’s what we’d really love to get back to.”
Powell pointed out the unemployment rate fell to 8.4 percent in August, down from 14.7 percent in July, the highest rate since the onset of the pandemic. In addition, he noted the number of Americans filing initial claims for unemployment benefits has dropped to below 1 million a week since the height of the crisis.
But the jobless claims numbers are still five times as high as it was before the pandemic, Powell said.
For the week ending Sept. 12, the advance figure for seasonally adjusted initial claims fell by 33,000 from the previous week’s revised level of 893,000.
“The overall picture is clear,” Powell said. “And that’s that the labor market has been recovering but that it’s a long way, a long way from maximum employment.”
Earlier this month, the ADP National Employment Report revealed private-sector employment increased by 428,000 jobs last month. That’s an improvement over the previous month’s 167,000 jobs, but still well below expectations. A survey of economists by Dow Jones had predicted a 1.17 million increase.