'What's Going On'?: Jerome Powell Pressed On Stalling Hiring Rates Despite Near 4% Unemployment Rate

2 days ago

During a press briefing on Wednesday, Federal Reserve Chair Jerome Powell was asked about hiring rates remaining around 2023-2024 rates despite unemployment nearing 4%.

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00:00Thank you. Mr. Chairman, Edward Lawrence with Fox Business. So, with near 4 percent unemployment

00:06rate, that should be low enough to bring people in from the sidelines in terms of hiring,

00:11but we're seeing the hiring rates have been stuck at 20, 23, 20, 24 levels. So, what's

00:15going on there? Yeah. So, that's a feature of the-has been

00:20for some time a feature of this labor market. You have pretty high participation accounting

00:25for aging. You've got wages that are consistent with 2 percent inflation, assuming that we're

00:30going to keep getting, you know, relatively high productivity. We've got unemployment,

00:34you know, pretty close to its natural level. But job-the hiring rate is quite low, but

00:41so is the layoff rate. So, there-you look at initial claims or layoffs, so you're not

00:46seeing people losing their jobs, but you're seeing that people who don't have a job having

00:50to wait longer and longer. And, you know, the question is, which way does that break?

00:54If we were to see a meaningful increase in layoffs, then that would probably translate

00:59fairly quickly into unemployment because people are-you know, it's not a big hiring market.

01:06We've been watching that, and it's just not in the data. It hasn't happened. What we've

01:09had is a low-firing, low-hiring situation, and it seems to be in balance now for, you

01:15know, for the last six, seven, eight months. That's where we are. There's healthy levels

01:20of job creation, too. So, overall, it's a labor market that's in balance, and, you know,

01:25we watch it very carefully.

01:27So then, have we seen the administration-the new administration's policies in the economic

01:31numbers yet? And when do you anticipate that happening?

01:33In labor or in other-

01:35In labor and inflation, just across the economy. Have we started to see the new policies take

01:39effect in the numbers?

01:42You know, only in a kind of early way. I mean, it's only been a few months, right? You know,

01:48for example, the layoffs that are happening here are-you know, they're certainly meaningful

01:54to the people involved, and they may be meaningful to a particular neighborhood or region or

01:58area, but at the national level, they're not-they're not significant yet. But we don't know. We

02:02don't know what-where that-how far that will go. We'll find out much more.

02:06I mentioned that you saw-we've had two very strong goods inflation readings in the last

02:13two months, which is very unexpected. I think-hard to trace it to specific tariffs, but it must

02:19have-it must have something to do with-it's either noise, and it will come back, and that's

02:24very possible, too. But if it is persistent, then it must be to do with, you know, people

02:29buying ahead of tariffs or raising prices ahead of tariffs and things like that. That-those

02:33kinds of things happen, and they're very, very hard to capture because so much of it

02:37is indirect.

02:38A great example is their washing machines were tariffed in the last round of tariffs,

02:44and prices went up, but prices also went up on dryers, which were not tariffed. So the

02:50manufacturers just-you know, they just kind of followed the crowd and raised it. So things

02:55happen very indirectly, and so there'll be a lot of work done in coming months to try

03:00to trace all that through. But ultimately, though, it's too soon to be seeing significant

03:04effects in economic data.

03:07Craig.

03:09Craig Torres from Bloomberg News. Thanks, Chair Powell. You said transitory price increases

03:15from tariffs are the base case, transitory is the base case. Wasn't it the base case

03:20last time? And didn't the FOMC forecast lower inflation ahead last time? And wasn't the

03:28lesson that it quickly got into services, haircuts, daycare, everything else? And so

03:33I'm just wondering why the nine aren't taking that on board and are cutting twice this year.

03:40When you say last time, are you talking about the last-

03:42Pandemic, yes.

03:43Okay, because you could have been talking about the last time there were tariffs, in

03:46which case the inflation was transitory. Yeah, no, of course, we're well aware of that. And

03:53you know, it's still the truth. If there's an inflationary impulse that's going to go

03:59away on its own, it's not the right policy to tighten policy, because by the time you

04:06have your effect, you're, you know, you're in effect by design, you are lowering economic

04:11activity and employment. And if that's not necessary, you don't want to do it. In real

04:15time, as we know, it's hard to make that judgment. So, and we're well aware, you know, of what

04:23happened, obviously, with the pandemic inflation. But I mean, we have to look at this as a different

04:31situation. There are differences and similarities. I mean, it's a different time. You know, we

04:36haven't had real price stability fully reestablished yet, and we have to keep that in mind. And,

04:43you know, we also have, we hear that people are very reluctant to take on, you know, to

04:48allow prices to go up. At the same time, we hear that businesses are intending to pass

04:52many of these prices through. So it's hard to say how this is going to work out.

'What's Going On'?: Jerome Powell Pressed On Stalling Hiring Rates Despite Near 4% Unemployment Rate

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