Fed chief urges Congress to expand US workforce while economy still strong

Fed chief urges Congress to expand US workforce while economy still strong
© Greg Nash

Federal Reserve Chairman Jerome Powell urged lawmakers Wednesday to target long-term threats facing the U.S. economy while the country still enjoys a record stretch of prosperity. 

In a Wednesday hearing, Powell called on Congress to bring more workers into the U.S. labor market and boost their flagging productivity before the American workforce atrophies under global pressure.

“The outlook is good,” Powell told the Joint Economic Committee on Wednesday, citing unemployment near 50-year lows, inflation “low and under control” and high consumer confidence.


But Powell added that Congress must act to boost the U.S. labor force participation rate of 62.3 percent and productivity, explaining that low interest rates could only do so much.

“We lag most other advanced economies,” Powell said, “but really the Fed can’t do much about it.

“It's more about fiscal policies that support a passion for the labor force,” Powell added, citing measures to expand skills training, curb opioid abuse and expand internships to low-income areas.

“There are just so many things that can be done,” Powell added. “This is not where we should be.”

Powell’s appearance marked his first comments since the Fed’s October interest rate cut and came amid a confounding time for the U.S. economy. 

A sharp global economic slowdown, widespread geopolitical unrest and rising trade tensions have weighed heavily on U.S. businesses, factories and exporters. But the U.S. economy has remained resilient in the face of global pressure, supporting a 3.6 percent unemployment rate with inflation below the Fed’s target and steady expansion.

The Fed has slashed interest rates in three consecutive meetings this year, following four hikes in 2018, as recession fears rose throughout the year. Powell said Wednesday that the Fed would likely keep interest rates steady unless the state of the economy deteriorated or new risks emerged.

The Fed’s pause is likely to frustrate President TrumpDonald TrumpMore than two-thirds of Americans approve of Biden's coronavirus response: poll Sarah Huckabee Sanders to run for governor Mexico's president tests positive for COVID-19 MORE, who has tried to bully the central bank into cutting interest rates to zero percent or below.

The president has demanded Powell act to match negative interest rates seen in countries facing severe economic downturns, claiming the Fed puts the U.S. at a “competitive disadvantage.”

“Give me some of that money. I want some of that money,” Trump said in a Tuesday speech at the Economic Club of New York. “We are competing against these other countries nonetheless, and the Federal Reserve doesn’t let us play at that game.”

Trump has pressured the Fed for more than a year to cut interest rates to stimulate the U.S. economy and help him clinch a trade deal with China. Falling interest rates reduce the value of the U.S. dollar, which makes American goods relatively cheaper in foreign markets.

Powell refrained from commenting on Trump’s attacks or trade policy before Congress on Wednesday, but the chairman stressed that negative interest rates would not make sense while the economy is expanding.

“Our economy is in a strong position. We've got growth. We have a strong consumer sector. We have inflation a bit below target,” Powell said. “So, the very, very low and even negative rates that we see around the world would not be appropriate for our country.”

While few, if any, lawmakers support Trump’s push for negative or ultra-low interest rates, members in both parties expressed concerns about the shortcomings of Fed monetary policy.

The Fed’s latest cut dropped interest rates to a 1.5 to 1.75 percent target range, giving the bank limited room for further cuts if the economy turns sour. And while the U.S. boasts strong top-line economic numbers, many regions of the country are still reeling from income inequality without seeing any of the post-recession employment boom.

“As you know, the economy as a whole can be very strong while entire segments of the U.S. population struggle,” said Rep. Carolyn MaloneyCarolyn MaloneyDemocrats urge tech giants to change algorithms that facilitate spread of extremist content Hillicon Valley: Biden names acting chairs to lead FCC, FTC | Facebook to extend Trump ban pending review | Judge denies request for Amazon to immediately restore Parler Judge denies request for Amazon to immediately restore Parler MORE (D-N.Y.), vice chair of the committee.

“It used to be that ‘a rising tide lifts all boats.’ But that has become less true, and we know that the tide lifts some boats much more than others.”

Sen. Mike LeeMichael (Mike) Shumway LeeOvernight Defense: Austin takes helm at Pentagon | COVID-19 briefing part of Day 1 agenda | Outrage over images of National Guard troops in parking garage Austin sworn in as nation's first Black Pentagon chief The Hill's 12:30 Report: Next steps in the Trump impeachment MORE (R-Utah), the panel chairman, added that persistently low inflation could allow the Fed to maintain lower interest rates that could spur further job gains. 

Powell responded that the U.S. economy may be able to sustain even lower levels of joblessness, with the rate already below the Fed’s previous 5 percent assumption for full employment. 

“I'm very open to the idea that we don't know where maximum precisely is,” Powell said. “We have to have significant humility when we make estimates of that, and we've got to let the data speak to us.”

Powell's testimony came on an eventful day in Washington, as House Democrats opened their first public impeachment hearings across the Capitol.

But neither Powell's testimony nor the televised hearings appeared to move markets Wednesday.

The Dow Jones Industrial Average ticked 108 points higher to a new record high, while the S&P 500 inched up less than 0.1 percent and the Nasdaq down less than 0.1 percent.