Federal Reserve Board Chairman Jerome Powell.
The “different economy” post-pandemic will impede the job hunt for millions of Americans, Fed Chair Powell said.
The Fed will continue to provide support to prevent scarring and persistent unemployment, he added.
The government should invest in policies that make for a more inclusive economy, Powell said.
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A full rebound from the coronavirus recession won't be as simple as recouping every lost job, Federal Reserve Chair Jerome Powell said Thursday.
The US economy is decidedly on the path to recovery. The March jobs report beat estimates and other indicators signal activity is bouncing back thanks to reopening and new stimulus. Continued vaccination suggests the coming months will show similarly encouraging trends.
There's reason to be optimistic, but there's still plenty of work to do before the country is completely healed, Powell said in a virtual conference hosted by the International Monetary Fund. While the pace of job growth has markedly improved, he said labor-market scarring could leave millions without work well into the future.
“The real concern is that longer-term unemployment can allow people's skills to atrophy, their connections to the labor market to dwindle, and they have a hard time getting back to work,” Powell said. “It's important to remember we are not going back to the same economy, this will be a different economy.”
Changes seen throughout the pandemic present sizable hurdles to a full labor-market recovery. Many industries automated jobs during the health crisis, and it's unlikely all of those openings will come back when the country reopens, Powell said.
That shift will predominately affect workers in the service industry, who are disproportionately low-earners, women, and minorities. That unevenness is a “serious issue” for the economy's long-term trajectory and underscores the Fed's plan to hold rates near zero, the central bank chief said.
“The really bad outcomes that we were concerned about a year ago have not materialized. Nonetheless, 9 [million] or 10 million people are out of work and we need to keep supporting them and supporting the economy,” Powell said.
One counter to permanent job losses could emerge from a greater focus on the climate crisis, Kristalina Georgieva, managing director of the IMF, said during the conference. Spending on training and support programs would be key to such a transition, but replacing traditional sector jobs with openings in the renewable energy industry would cover those costs, she added.
“We are going to have a different economy,” Georgieva said, echoing the Fed chief. “It doesn't mean a worse economy if we think well in advance, if we think about educational attainment, if we think about flexibility for people entering the labor market, and if we think about where growth is going to come from.”
The managing director also threw her support behind President Joe Biden's $2.3 trillion infrastructure proposal, noting that such spending could bolster the labor market's rebound.
Powell refrained from backing the White House's proposal, but still highlighted the importance of investing in a more inclusive economy. As the US puts the pandemic and its immediate damage behind it, policymakers should spend on programs and policies that lift longer-term potential, he added.
“Particularly invest in people, so that they can take part in, contribute to, and benefit from the prosperity of our economy,” he said, adding he wasn't “talking about any particular bill.”
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