US jobs growth lacking; inflation pressure may last into 2022 – SF Fed official

The U.S. economy remains far from meeting the Federal Reserve's employment goals and skyrocketing price pressures remain temporary, though they could last into 2022, a key Fed official said Aug. 10 during the latest episode of Market Intelligence Live.

During the episode, Sylvain Leduc, executive vice president and director of research of the Federal Reserve Bank of San Francisco, said the ongoing post-pandemic recovery remains plagued by uncertainty.

"The pace of the economy is really dictated by the evolution of the virus and this is as true now as it was early on in the pandemic," Leduc said.

On employment, Leduc said that COVID-19 set the U.S. back roughly two decades and that the country remains far from the Fed's stated goals of maximum employment. The pandemic hit the services industry particularly hard, Leduc said, and has worsened numerous divides in the workforce.

For example, the unemployment rate for white workers was 4.8% in July, compared to 8.2% for Black or African American workers, according to the latest Labor Department data.

"We're leaving money on the table, that basically is impacting the amount of potential output we can grow," Leduc said. "It's important to make sure that those workers are not structurally unemployed."

At the same time, the number of unfilled jobs soared to a record 10.1 million positions at the end of June, according to the Labor Department. Leduc attributed this to a lack of childcare options as schools are not fully reopened and fears of the health impacts of the coronavirus and its variants. He said the impact of expanded unemployment benefits was relatively minor, as some have blamed those on a sluggish return by many to the workforce.

Additionally, Leduc said the ongoing rise in inflation was likely transitory, adding that price pressures such as the recent runup in lumber prices have already or soon will ease.

"I think what we're looking at those pressures not going into long-term inflation expectations," Leduc said.

Supply bottlenecks that have caused congestion at ports, delivery delays and a rise in shipping costs could be resolved by the end of the third quarter or the start of the fourth quarter, Leduc said.

Much of the rise in inflation is due to the comparison of current prices to very low prices during the height of the pandemic last year, he said.

"This is going to dissipate as we go forward this fall," Leduc said. "We're always very aware and concerned about inflation and it’s something that we're always watching very closely."

Watch a replay of the interview on LinkedIn or YouTube.