US economy at inflection point, says central bank chairman

NEW YORK • The US economy is at an "inflection point" with expectations that growth and hiring will pick up speed in the months ahead, but some risks remain, particularly any resurgence in the coronavirus pandemic, Federal Reserve chairman Jerome Powell said.

In a brief preview of a longer interview with CBS' news magazine programme 60 Minutes, set to air in full on Sunday night, the central bank chief echoed both his recent optimism about the economy and a now-familiar warning that Covid-19 remains the main risk.

"We feel like we're at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly, so the principal risk to our economy right now really is that the disease would spread again," he said. "It's going to be smart if people can continue to socially distance and wear masks."

Indeed, recent data on the economy has been positive by and large, with a better-than-expected 916,000 jobs created last month.

While pockets of the United States are seeing an upswing in Covid-19 cases, infection rates in large parts of the country are at multi-month lows, and the vaccine roll-out continues apace with a one-day record of 4.6 million doses given last Saturday, a Reuters tracker shows.

That has allowed wide swathes of the economy to fully reopen. Activity in the hardest-hit leisure and entertainment sectors has picked up significantly in recent weeks.

Still, even with the big rise in March employment, the labour market remains 8.4 million jobs short of where it was in February last year, and even further short of where the level of employment would be now had the pandemic never occurred.

The rebound has also been uneven. The unemployment rate is 6 per cent nationally, but is 9.6 per cent for blacks and 7.9 per cent for Hispanics versus 5.4 per cent for whites, and 8.2 per cent for those without a high school diploma versus 3.7 per cent for those with college degrees.

That is why Mr Powell and his fellow Fed policymakers have repeatedly vowed not to let up any time soon on the massive support they are providing to the economy through near-zero interest rates and US$120 billion (S$161 billion) a month of bond purchases.

Last year, they committed to a new operating framework that places restoring the US labour market to a "maximum" level of employment as the paramount of their two congressionally mandated objectives. The other is price stability, or keeping inflation broadly in line with their target of 2 per cent on a year-over-year basis.

The new framework builds in allowances for inflation to run above that level for a time without them intervening to rein it in, measures that typically involve imposing more restrictive conditions that would likely slow activity and hiring.

But their commitment to that pledge is going to be tested in the coming months with data likely to show a pickup in inflation, especially measured against levels a year ago when the early stage of the pandemic crushed consumer demand and prices along with it.

REUTERS