Although the economic recovery “has progressed more quickly than generally expected … the outlook remains highly uncertain,” said Fed Chairman Jerome Powell, in a speech to the National Association for Business Economics, on Tuesday.
“The expansion is still far from complete,” said Powell, who argued in favor of more policy intervention by monetary and fiscal authorities rather than less.
A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy. That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses” said Powell. In contrast, “the risks of overdoing it seem, for now, to be smaller.”
Additional aid, even if it ultimately proves unnecessary “will not go to waste,” said Powell. “The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”
The U.S. economy is clearly not out of the woods yet, according to Powell. The pace of the economic recovery has slowed since May and June, permanent job losses are rising, and the unemployment rate, though officially down to 7.9%, is closer to 11% after accounting for “mischaracterizations of job status” and the decline in labor force participation, Powell said.