Federal Reserve Vice Chairman Richard Clarida on Wednesday indicated he was more worried about the health of the U.S. labor market than high inflation.
After looking at the details of the weaker-than-expected April job report, Clarida said was concerned about the immediate prospects for job growth.
“The near term outlook for the labor market appears to be more uncertain than the outlook for activity,” Clarida said, in remarks at the start of a discussion of the outlook with the National Association for Business Economics.
The labor market added 266,000 jobs in April, well below market expectations of one million new jobs.
Clarida said that employment remains 8.2 million below its pre-pandemic peak.
“At the recent pace of payroll gains – roughly 500,000 per month over the past three months – it would take until August 2022 to restore employment to its pre-pandemic level,” Clarida said.
The Fed vice-chairman said he expects higher inflation readings over the next few months, but these are likely to be transitory.
“I expect inflation to return to – or perhaps run somewhat above – our 2% longer-run goal in 2022 and 2023,” he said. This would fit under the Fed’s new policy framework, he noted.
He spoke ahead of the April consumer price index, which showed higher inflation than expected. The Fed vice-chair is likely to be pressed on the CPI report during the question-and-answer session.
The Fed has been buying $120 billion of assets, along with keeping its policy rate close to zero, to support the economy.
Fed officials have said they want to see “substantial further progress” in their two goals of full employment and stable 2% average inflation before cutting back on the pace of purchases.
Clarida said it would likely take “some time” for this benchmark to be reached, giving no hint that he wants to start a formal discussion of when it would be appropriate to start to taper asset purchases.
were set to open lower on Wednesday after the strong inflation reading.