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Chair Powell Questioned On Productivity Growth and Rent & Housing Prices

FED
  • Q: How do you see productivity growth?
    • A: My own view is, I think if you look back to the pandemic, you saw a spike in productivity as workers were laid off and activity didn't decline as fast. Then you saw a deep trough of productivity. Then you saw high productivity last year in 2023. I think we are basically in the throes of getting through the pandemic economy. The question will be, what has changed? Productivity tends to be based on fundamental aspects of our economy. Will it be the case that we come out of this more productive on a sustained basis? I don't know.
    • What would it take? I see work from home doesn't seem like it is the a big productivity. AI, maybe, but not in the short run. Probably in the longer run. Right now, I would say productivity is kind of what falls out of the broader forces that are driving people in and out of the labor force and activity returning, and Supply Chains getting fixed.
  • Q: How closely are you are watching rent and housing prices as you evaluate when to cut rates? It seems like housing prices are not coming down as quickly as you expected.
    • A: We are not targeting housing price inflation, the cost of housing and any of those things. You are taking the owner's equivalent rent and actual rent paid by tenants and running that through the CPI calculation or the PCE calculation, the one we look at. It tells you market rents are increasing at a much lower rate, or even flat, and that will show up in inflation over time. It has to, as long as that remains the case.
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