Federal Reserve Chair Jerome Powell is warning of pain in the job market in the war against high inflation. A growing coalition of progressives has its own message to the Fed: Stop punishing workers.
Jerome Powell takes a coffee break with attendees of the central bank's annual symposium at Jackson Lake Lodge in Grand Teton National Park on Aug. 26, 2022, in Moran, Wyo. | Amber Baesler/AP PhotoFederal Reserve Chair Jerome Powell is warning of pain in the job market in the war against high inflation.
But Powell — who will address the labor market situation at a Brookings Institution event on Nov. 30 — is now battling persistent and raging inflation, a post-pandemic trend that the Fed didn’t see coming. That has prompted policymakers to return to their traditional focus on fighting inflation by cranking up borrowing costs even if it leads to a surge in joblessness and triggers a recession.
Senior central bank policymakers say they’re open to signs that inflation can cool without much of a hit to employment; for example, a key measure of employer compensation costs, given particular weight by the Fed, shows that private sector wages are decelerating. But they’re not convinced yet. Powellin early November that he still thinks the labor market is “out of balance.”
For their part, Fed officials in September said they expect their rate moves to drive unemployment to 4.4 percent by next year — which could translate to more than a million job losses. But they’re not targeting a certain level of employment. “We have seen increasing examples of companies talking about the fact that either they are seeing their input costs coming down, or they see a future in which their input costs come down,” she said, citing corporate earnings calls with shareholders. “And then pivoting to saying, ‘this is really good news, because we’re going to keep the same pricing,’ or in some cases, saying, ‘we’re going to be doing more pricing increases.
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