WASHINGTON • US Federal Reserve chairman Jerome Powell, citing the country’s push after World War II to find jobs for returning soldiers, has called for a broad national effort to get Americans back to work after the coronavirus 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,” Mr Powell said in remarks made at the Economic Club of New York on Wednesday.
“It will require a society-wide commitment, with contributions from across government and the private sector.”
Recovery, Mr 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 Mr Powell’s remarks align closely with the sort of ambitious spending proposals being discussed by President Joe Biden and Treasury Secretary and former Fed chief Janet Yellen.
Mr Biden is urging Congress to pass a US$1.9 trillion (S$2.5 trillion) emergency spending Bill, and is planning a longer-term infrastructure effort that some analysts expect will involve trillions of dollars more.
Mr 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, Mr Powell said he felt the United States needed a more organised and directed strategy to meet its economic potential – an argument similar to that made by the current administration as it organises its investment and spending plans, and considers major programmes – for example, to lower carbon emissions.
Again referencing the national effort mobilised in wartime or for projects like the Moon landing, backed by federal spending for basic science and research, Mr Powell said “it would be great if we had a national strategy to make the US economy as big, and to make the prosperity the US has as broadly shared, as possible”.
Mr Powell is in the last year of a four-year term as Fed chairman, and it will be up to Mr Biden to decide in coming months whether to reappoint him or not.
Prompted by a question, Mr Powell said without flinching: “I love my job.” Arguably, there is much for the current White House to love about how Mr Powell has positioned monetary policy.
Appointed by former president Donald Trump but also a frequent target of Mr Trump’s ire, Mr 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 US remains about nine 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 that have been hard hit by the pandemic.
LPL Financial’s senior market strategist Ryan Detrick said: “The Fed is almost demanding that Congress and the private sector step up and help the sluggish employment backdrop we’re seeing.”
Though the central bank has no direct say over how the federal government spends money or how much it raises, Fed policy does influence the interest rate the government pays and thus the cost particularly of longer-term investments.
Amid the coronavirus pandemic, Fed policymakers have generally set aside concerns about the level of federal debt, and focused more on the economy’s immediate needs.
Mr Powell on Wednesday cemented that position, noting that, after World War II, as the economy transitioned from wartime and needed to absorb millions of returning soldiers into the labour 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 labour market,” he said.