BOSTON, Nov 19 (Reuters) – For all the complications and disruptions of the coronavirus pandemic, U.S. labor markets are otherwise far from the strong conditions that prevailed before the crisis, a paper presented at a Boston Fed research conference found. was presented. said
Almost all of the hit to the US labor market in 2020, when COVID-19 hit, was linked to temporary layoffs that were quickly canceled, said the paper presented on Saturday.
Adjusted for these temporary shifts, “the labor market remained surprisingly tight throughout the crisis, despite dramatic job losses,” and recovered to return to very tight conditions by the spring of this year.
“I think if we were going to see big changes, we would have seen them by now,” said Lisa Kahn, an economics professor at the University of Rochester who was one of the co-authors.
The unemployment rate of the United States has climbed in 2020. From a reading of 3.5% in February of that year, it rose to 14.7% in April of that year, before entering a much faster-than-expected recovery that resulted in much lower unemployment rates. – it stood at 3.7% last month – and very strong levels of job creation.
Fears that the pandemic will cause deep and lasting damage to the economy have fueled a historically tough campaign of stimulus by the government and the Federal Reserve, as elected officials and central bankers have been wary of a weak policy response to the Great Recession of a decade ago. caused a slow recovery for the economy.
That policy response is now seen as a key driver in the sharp rise in inflation following the peak of the pandemic. Facing the highest levels of inflation in four decades, the Fed is aggressively raising its short-term rate target to help ease price pressures. As part of that effort, Fed officials recognize that their actions could send the economy into recession and would likely raise the unemployment rate.
“By raising rates, we aim to slow the economy and bring labor demand into better balance with supply. The goal is not a significant reduction,” Boston Fed President Susan Collins said Friday in remarks that opened a conference at her bank. Collins was optimistic that there was a path to price stability that involved only modest increases in the unemployment rate.
Lawrence Summers, a Harvard University professor and one-time candidate to lead the central bank, renewed his criticism of the Fed while discussing the paper on Saturday, saying the idea that the labor market had only been temporarily adjusted by the pandemic joint venture.
He reiterated that the Fed and the broader government made mistakes in providing massive levels of stimulus and that’s why inflation is so high right now.
Given what the government did, “it’s hard to imagine how it could have led to anything other than a heavily inflationary situation,” Summers said.
Reporting by Michael S. Derby; Editing by Josie Kao
Our Standards: The Thomson Reuters Trust Principles.