U.S. job market little affected by pandemic, say researchers

BOSTON, Nov 19 (Reuters) – For all the turmoil and disruption of the coronavirus pandemic, U.S. labor markets have come out on the other side not far from the strong conditions that prevailed before the crisis, paper presented at the Boston Fed research conference said.

Almost all of the hits the US labor market took in 2020, when COVID-19 hit, were tied to temporary layoffs that were quickly canceled, the paper presented Saturday said.

Adjusted for these temporary changes, “the labor market remained remarkably tight during the crisis, despite the dramatic job losses” and by the spring of this year had recovered and returned to very tough conditions.

“I think if we were going to see large-scale changes, we would have seen them by this point,” said Lisa Kahn, a professor of economics at the University of Rochester, who was one of the co-authors.

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The US unemployment rate reached a virtual turning point in 2020. From a reading of 3.5% in February of that year, it rose to 14.7% in April of that year, before undergoing a much faster than expected recovery. it resulted in very low unemployment rates. — it stood at 3.7% last month — and very strong levels of job creation.

Fearing that the pandemic would cause deep and lasting damage to the economy, the government and the Federal Reserve generated a historically motivated aggressive campaign, as elected officials and central bankers agreed that the weaker policy response to the Great Recession would lead to more it’s ten years ago. slow recovery for the economy.

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That policy response is now seen as a key driver of the massive surge in inflation following the worst phase of the pandemic. Facing the highest inflation levels in forty years, the Fed is aggressively raising its short-term rate target to help lower price pressures. As part of that effort Fed officials recognize that their actions could push the economy into recession and the unemployment rate is likely to rise.

“By raising rates, we aim to slow the economy and bring labor demand and supply into better balance. The resolution is not a significant downturn,” Boston Fed chief Susan Collins said Friday in remarks that opened the conference at her bank. Collins was optimistic that there is a path towards price stability that does not involve a small increase in the unemployment rate.

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Lawrence Summers, a Harvard University professor and one-time contender to lead the central bank, renewed his criticism of the Fed while discussing the paper on Saturday and said that the idea that the labor market was only temporarily shedding at the right time.

He reiterated that the Fed and the wider government made a mistake in providing huge levels of stimulus and that is why inflation is so high now.

Given what the government has done, “it’s hard to imagine how that could lead to anything other than a substantial inflationary situation,” Summers said.

Reporting by Michael S. Derby; Editing by Josie Kao

Our Standards: The Thomson Reuters Trust Principles.


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