Powell Sees US On Path to Very Strong Labor Market

Q: Can you walk us through expectations specifically on the labor market into 2023?

• A: If you look at the labor market and demand for workers, and job creation, and think ahead, it's clear and I'm confident we are on the path to a very strong labor market, that shows low unemp, high participation, rising wages. That's shown in our projections and in outside projections. In terms of exactly what that means, we will have to see how things evolve. We learned in the last, long expansion that labor supply can exceed expectations, and I have no reason to think that won't happen again.
• Re participation, we have seen a significant number of people retire, and so we don't actually know exactly what participation will be as we go forward. But I think that it can return to high levels although it may take time to do that. But overall this is going to be a very strong labor market.
• In the near term, a few things holding back labor supply - large amounts of job openings and large number of people who are unemployed, and the pace of filling jobs is slower than it might be. Finding a new job takes longer than going back to one's old job [skills matching, etc]. Also significant number of people are concerned to go back to public facing jobs because of COVID.
• There's also the question of childcare. As schools reopen etc. end of fall, we should see that supporting labor force participation. Unemployment insurance for something like 15 million people will either end or be diminished as we move through the summer and into the fall by the end of September, and that may also encourage some to go back in and take jobs. You put all those together and I would expect that we would see strong job creation, building up over the summer and going into the fall.-This is an extraordinarily unusual time, I think we have to be humble about our ability to understand the data. it's not a time to try to reach hard conclusions about the labor market, about inflation, about the path of policy. We need to see more data, need to be a little patient. I do think though that we will be seeing some things coming up in coming months that will inform our thinking.