Federal Reserve Gov. Christopher Waller said Thursday he was surprised by weak hiring and high inflation readings in April, but he joined a chorus of senior central bank officials who say the the economy still needs lots of help.
Waller warned against putting too much weight on recent economic reports that suggested the U.S recovery is facing more headwinds. He said he expects job creation to speed up by the fall and that the recent increase in inflation will unwind once the global economy has fully recovered from the pandemic.
“I have two messages today. The first is that, despite an unexpectedly weak jobs report, the U.S. economy is hitting the gas and continuing to make a very strong recovery from the severe COVID-19 recession,” Waller said in a virtual speech to the The Global Interdependence Center.
“My second message is that, despite the unexpectedly high CPI inflation report yesterday, the factors putting upward pressure on inflation are temporary, and an accommodative monetary policy continues to have an important role to play in supporting the recovery,” he added.
Waller said a variety of factors have kept more people from rejoining the workforce even with job openings at a record high. He cited generous unemployment benefits, closed schools, limited child-care options and early retirements.
“As vaccinations continue to climb, fears of reentering the labor force should decline. By September, most schools and daycare facilities are expected to fully reopen, resolving recent child-care issues for many families,” he said.
“Finally, the enhanced unemployment benefits passed in response to the pandemic expire in September, and research has shown repeatedly that the job-finding rate spikes as unemployment benefits run out.”
Waller also said the sharp increase in inflation should abate eventually, though he indicated it could take longer than he previously believed. He said he now expects inflation to exceed the Fed’s 2% goal in 2021 and 2022 before tapering off.
The Fed needs at least several months of economic data, Waller said, before the central bank decides to start easing support for the U.S. economy. The Fed has cut its key interest to near zero and is buying $120 billion in bonds each month to help keep the cost of business and consumers loans low.
“Now is the time we need to be patient, steely-eyed central bankers, and not be head-faked by temporary data surprises,” Waller said.