Fed chair Jay Powell had a message late last week for Australia, the US (of course), and the rest of the world about the battle to control the coronavirus and emerge with the economy in good shape.
He told National Public Radio (NPR) in the US. “We do think it will get harder from here.”
He repeated earlier comments tying the progress of the economy to the coronavirus, and he encouraged following safety guidelines like wearing masks and maintaining social distancing.
“There are actually enormous economic gains to be had nationwide from people wearing masks and keeping their distance,” he said.
And like Dr. Lowe, Mr. Powell made it clear that interest rates will remain lower for longer:
“We think that the economy’s going to need low-interest rates, which support economic activity, for an extended period of time,” Powell said in his interview with NPR after the nonfarm payrolls report was released earlier on Friday (which showed a 1.37 million rise in new jobs, down from nearly 1.8 million in July).
“It will be measured in years,” Powell predicted.
“However long it takes, we’re going to be there. We’re not going to prematurely withdraw the support that we think the economy needs,” he added.
These are also messages were are hearing from the RBA here about the length of time that interest rates will remain low.
Powell’s comments gave to be viewed against the Fed changing its inflation target stance to an average of 2% over time and committing itself to allowing wages and employment to grow for longer.
“While many jobs have come back, as many as 11 million people aren’t back to work yet, including those in hotel, entertainment, and travel-related jobs, Powell said.
That is also the situation here in Australia.
The US jobless rate would have been closer to 9% if households gave an accurate description of their employment status.
The August employment picture was also softer after stripping out the hiring of 238,000 temporary Census workers and those who work in public education (schools rehired staff for the 2020-21 year in August).
Since April there has been confusion about people who have been laid off but not sacked from their jobs and are receiving benefits. Many class themselves as being absent from work instead of being unemployed.
Several million Americans still haven’t returned to the labour force, however, since the start of the pandemic and some 29 million were reportedly receiving jobless benefits as of the middle of August.
The jobless claims might be easing (but still running at more than 800,000 new applications a week) but the reality is that the continuing weak labour market, weak wages, and no inflation makes for a tough economy to manage, in the US and in Australia.