Fed’s Barkin Sees ‘Long Way to Go’ in U.S. Labor-Market Progress

Federal Reserve Bank of Richmond President Thomas Barkin said the U.S. labor market isn’t close to its pre-pandemic levels and he wants to see much more progress before slowing central bank asset purchases.

“I still think we’ve got a long way to go on the job front,” Barkin said Tuesday in a broadcast interview with MNI Market News, pointing out that employment was 7.6 million below the pre-Covid-19 level.

Further employment gains will be needed before tapering bond purchases, the Richmond Fed leader said, even as inflation has risen more than the central bank’s 2% target. The policy-setting Federal Open Market Committee has pledged to keep buying $120 billion in Treasuries and mortgage-backed securities every month until there is “substantial further progress” on the committee’s goals.

“I think you can argue reasonably compellingly, we’ve made substantial further progress on the inflation,” Barkin told MNI’s Pedro da Costa. On employment, “it just feels like further progress, but doesn’t feel like -- to me -- like substantial further progress.”

Jobs Gains

The employment-to-population ratio hasn’t recovered since falling early last year as Americans left the workforce, Barkin said. Workers may have left for a variety of reasons, including enhanced unemployment insurance, child care issues with children at home, and worries about health due to the pandemic, he said.

Barkin, a voter this year on the FOMC, said he didn’t believe there were “structural” reasons that would keep employment from recovering eventually, and he expects to see strong job gains by August and September.

Fed officials will be focused on Friday’s employment report as the latest gauge of progress. Payrolls may have risen by 700,000 in June, according to the median estimate in a Bloomberg survey of economists. That would be the biggest increase since March.

Barkin’s view was echoed by Fed Minneapolis President Neel Kashkari, who said the U.S. economy has a long way to go to fully recover from the pandemic but he expects employment to pick up after the summer months.

“I’m anticipating a very strong labor-market recovery in the fall,” Kashkari said in an interview Tuesday on Wisconsin Public Radio. “The economy is positioned for a very strong recovery but we need to make sure that everybody who wants a job is able to find a job.”

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