(Reuters) – The U.S. Federal Reserve looks at a wide range of indicators in gauging how close the economy is to reaching full employment, Fed Chair Jerome Powell said on Tuesday, as he reiterated the benefits of targeting workers who often remain on the sidelines.
“When we assess whether we are at maximum employment, we purposely look at a wide range of indicators,” Powell told a virtual conference on diversity and inclusion in economics, finance, and central banking, co-hosted by the Fed alongside other major central banks.
In doing so the Fed is attentive to labor market disparities, “rather than just the headline numbers,” Powell said as he noted an economy is healthier and stronger when as many people as possible are able to work.
The Fed will begin later this month to remove the first pillar of extraordinary stimulus it introduced in March 2020 to shield the economy from the COVID-19 pandemic, when starts to taper its massive bond buys.
Fed officials have pointed to strong economic growth and job gains as proof the economy can begin to stand on its own. But Powell last week also said the Fed would remain patient and prioritize further strides towards maximum employment before raising interest rates, despite jitters over higher-than-expected inflation.
But there is increasing debate among policymakers about how many more jobs the economy can add, and how much longer high inflation can be tolerated with investors currently expecting an increase in interest rate in the middle of next year.
Job growth has averaged 582,000 per month this year but the labor force is down 3 million from its pre-pandemic level.
An announcement on whether U.S. President Joe Biden will renominate Powell to a second term as head of the central bank is expected soon.
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