Federal Reserve Update

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A senior central bank official said that despite the sudden slowdown in U.S. job growth last month, the Fed should continue to advance a plan to curtail its large-scale pandemic stimulus plan.

St. Louis Fed President James Brad dismissed concerns about the faltering labor market recovery, even if only 235,000 jobs were created in August, and reiterated his call for the central bank to start scaling back or “shrinking” its massive upcoming launch of $120 billion per month Bond purchase plan.

Brad said in an interview with the British “Financial Times”: “There is a great demand for workers, and there are more job vacancies than unemployed workers.” “If we can match workers and better control the pandemic, then next year we There must be a very strong labor market.”

He added: “In general, the production cut will begin this year and will end sometime in the first half of next year.”

Brad did not take clues from a single strong and weak employment report, but stated that he is looking for opportunities to add about 500,000 jobs per month on average this year. After the August report, this is still the current rate of hiring.

The job is there, and workers may not want to accept these jobs now

“When you are in a crisis, you have to be prepared for twists and turns,” he said. “These numbers will fluctuate up and down.”

Until August, the labor market has achieved impressive growth, with approximately 1 million new jobs created in June and July.

With the unemployment rate falling, Fed officials have Indicated They plan to start reducing bond purchases this year and promise to maintain this practice until they see “significant progress” in achieving maximum employment and an average inflation rate of 2%.

However, the continued surge in Covid-19 cases is related to the more contagious Delta variant, and new evidence suggests that recruitment in many service-oriented industries such as leisure and hospitality has slowed Shaken confidence In the cone timeline.

Brad acknowledged on Tuesday that concerns related to Delta Air Lines are having an impact, but emphasized other supply issues-including increased unemployment benefits. be expired For more than 7.5 million Americans this week-it also prevents people from returning to work.

“The work is there, but workers may not want to accept these jobs now,” he said, adding that the surge in personal savings during the pandemic and the $1,400 stimulus check meant “sufficient household income.”

He said: “They can be cautious about the work they do, or they may feel that they can find a better job by waiting harder or looking for it.”

In order to attract new employees, employers have increased wages-this movement started last month and helped increase the average hourly wage by 0.6% from July. As more workers return, the chairman of the St. Louis Fed stated that he expects the unemployment rate to fall below 5% by the end of this year.

Brad is one of the longest-serving members of the Federal Open Market Committee and will have the right to vote next year. He is “Hawks“Members of the Federal Reserve.

For a long time, he has urged the central bank to quickly withdraw stimulus measures to ensure the flexibility to raise interest rates next year in the event of further inflation. persistent Better than expected.

“Many people say that once we enter 2022, inflation will slow down. There is one case of this, but there is also one case that shows that it will not moderate and may go in another direction. [due to] Due to the Delta variant, there are now additional supply restrictions from international sources,” he said.

Brad added that in order to give the Fed the “option” to raise interest rates in 2022, the Fed should complete asset purchases by the end of the first quarter.

Brad said that another reason for the rapid contraction is the “emerging real estate bubble,” which may be partly driven by the Fed’s ultra-loose monetary policy. Housing prices have soared in recent months. The latest national housing data from Standard & Poor’s CoreLogic Case-Shiller shows an increase of 18.6% from June 2020.