BOSTON, Nov 19 (Reuters) – For all the commotion and disruptions of the coronavirus pandemic, US labor markets were not far from the strong conditions that existed before the crisis, said a paper presented at the Boston Fed research conference.
Nearly all of the hit to the US labor market in 2020, when COVID-19 hit, was linked to temporary layoffs that were swiftly cancelled, the paper tabled on Saturday said.
Adjusted for these temporary shifts, “the labor market remained surprisingly tight throughout the crisis despite dramatic job losses” and by the spring of this year had recovered and returned to extremely tight conditions.
“I think if we were going to see massive changes, we would have seen them from this point,” said Lisa Kahn, an economics professor at the University of Rochester who was one of the co-authors.
The US unemployment rate went on a virtual rollercoaster ride in 2020. From a reading of 3.5% in February of that year, it rose to 14.7% in April of that year, a much faster than expected recovery before the unemployment rate fell. – It was up 3.7% last month – and a very strong level of job creation.
Fears that the pandemic would cause deep and lasting damage to the economy led to a historically aggressive campaign of stimulus by the government and the Federal Reserve, as elected officials and central bankers were aware that the economy was vulnerable to the Great Recession a decade earlier. A slow recovery for the economy due to the policy response.
That policy response is now being seen as a key driver of the sharp rise in inflation following the most acute phase of the pandemic. Facing the highest level of inflation in forty years, the Fed is aggressively raising its short-term rate target to help ease price pressures. As part of that effort, Fed officials recognized that their actions could push the economy into recession and increase the unemployment rate.
“By raising rates, we are aiming to slow the economy and bring labor demand into better balance with supply. The intention is not a significant downgrade,” Boston Fed leader Susan Collins said in remarks Friday at her bank conference. opened. Collins was optimistic that there is a path to price stability that entails only a modest unemployment rate increase.
Lawrence Summers, a Harvard University professor and one-time contender to lead the central bank, renewed his criticism of the Fed while discussing the paper on Saturday, saying the labor market was only temporarily dented by the pandemic , Good.
He reiterated that the Fed and the wider government made a mistake in providing massive stimulus and that is why inflation is so high now.
Summers said that given what the government had done, “it is difficult to imagine how this could lead to anything other than a substantially inflationary situation.”
Source : Business News