Top Fed Officials Say The Labor Market Needs More Time To Heal

Top Federal Reserve officials emphasized on Monday that the labor market was far from completely healed, underlining that the central bank will need to see considerably more progress before it will feel ready to raise interest rates.

“We still have a long way to go until we achieve the Federal Reserve’s maximum employment goal,” John C. Williams, the president of the Federal Reserve Bank of New York, said in a speech Monday afternoon.

Leading Fed officials — including Mr. Williams, Lael Brainard and Jerome H. Powell, the Fed chair — have given similar assessments of the outlook in recent days and weeks. They have pointed out that the economy is swiftly healing, bringing back jobs and normal business activity, and that existing disruptions to supply chains and hiring issues will not last forever.

But they say that the recovery is incomplete and that it’s worth being modest about the path ahead, especially as the Delta variant demonstrates the coronavirus’s ability to disrupt progress.

“Delta highlights the importance of being attentive to economic outcomes and not getting too attached to an outlook that may get buffeted by evolving virus conditions,” Ms. Brainard, a Fed governor, said on Monday.

Those comments came on the heels of the Fed’s September meeting, at which the central bank’s policy-setting committee clearly signaled that officials could begin to pare back their vast asset-purchase program as soon as November. They have been buying $120 billion in government and government-backed securities each month.

The speeches on Monday emphasized that as officials prepare to make that first step away from full-fledged economic support, they are trying to separate the decision from the Fed’s path for its main policy interest rate, which is set to zero.

Central bankers have said they want to see the economy return to full employment and inflation on track to average 2 percent over time before lifting rates away from rock bottom.

That makes the debate over the labor market’s potential a critical part of the Fed’s policy discussion.

Some regional Fed presidents, including James Bullard at the Federal Reserve Bank of St. Louis and Robert S. Kaplan at the Federal Reserve Bank of Dallas, have suggested that the labor market may be tighter than it appears, citing data including job openings and retirements.

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