Federal Reserve Chair Jerome PowellJerome PowellWill the Fed repeat the mistakes of the Great Inflation? Stocks open with losses after remarkable Monday comeback On The Money — Support for new COVID-19 relief grows MORE on Tuesday said high inflation is a “severe threat” to achieving maximum employment in the U.S.
Powell appeared before the Senate Banking Committee for a confirmation hearing after being renominated to the top position at the nation's central bank.
“To get the kind of very strong labor market we want with high participation it's gonna take a long expansion. We can see that participation is moving only very slowly. And to get a long expansion we're gonna need price stability, and so in a way, high inflation is a severe threat to the achievement of maximum employment and to achieving a long expansion that can give us that,” Powell said in response to a question from Sen. Pat ToomeyPatrick (Pat) Joseph ToomeyConservatives are outraged that Sarah Bloom Raskin actually believes in capitalism Meet Washington's most ineffective senator: Joe Manchin Black women look to build upon gains in coming elections MORE (R-Pa.), the ranking member of the committee.
December’s disappointing job report released by the Labor Department last week left many concerned about how many Americans may have left the labor force as a result of the COVID-19 pandemic when demand for workers remains high.
The U.S. added 199,000 jobs to the workforce last month, which was significantly lower than the 420,000 jobs economists had expected would be added. Wages grew by 0.6 percent but labor force participation remained unchanged.
More than 10 million jobs were posted in November according to the Labor Department, with a record number of workers voluntarily leaving their jobs. It is likely, however, that some of them left previous positions to take on new roles with higher pay.
The lackluster jobs report came as inflation in the U.S. is at a roughly 30-year high, which is driving up prices for buyers nationwide. The consumer price index, a key gauge of inflation, increased by 6.8 percent in the year leading into November, the highest rate since 1982, and 0.8 percent over just the previous month.
Powell on Tuesday said that if inflation continues at elevated levels for a longer period than expected the Federal Reserve will raise interest rates.
“If we see inflation persisting at high levels longer than expected, then we will, you know, then we'll, if we have to raise interest rates more over time we will,” Powell said. “We will use our tools to get inflation back.”