According to Federal Reserve chairman Jerome Powell, the US real unemployment rate is at 10%. If you factor in misclassification errors in the government numbers, the real number is higher than what the Bureau of Labor Statistics reported at 6.3% last week. Powell noted that around 4 million jobless Americans stopped looking for jobs. This means they officially don’t count as unemployed. If they were, the unemployment rate would be closer to 10%.
Far From a Strong Labor Market
“We are still very far from a strong labor market whose benefits are broadly shared,” Powell said. He spoke via virtual speech for the Economic Club of New York on the state of the labor market. “The pandemic has led to the largest 12-month decline in labor force participation since at least 1948,” he added.
While the unemployment rate already fell from the March high of 14.8%, it remains higher than pre-pandemic jobless levels. Last February 2020, the US recorded a 3.5% unemployment rate, the lowest level in almost 50%. Right now, more than 10 million Americans remain jobless. January recorded 5 million workers leaving the market this month.
Strengthening the Labor Market
“The Bureau of Labor Statistics reports that many unemployed individuals have been misclassified as employed,” Powell said. “Correcting this misclassification and counting those who have left the labor force since last February as unemployed would boost the unemployment rate close to 10 percent in January.” Meanwhile, Americans are saving more during the pandemic and holding off on the big spending. But, a huge divide between those with safe, cushy jobs and those struggling to get by. Meanwhile. job losses among the highest-earning 25% of workers stood at 4%. In contrast, the poorest one quarter is at 17%, according to Powell.
Once the pandemic ends, it’s still a race to get jobs. “Given the number of people who have lost their jobs and the likelihood that some will struggle to find work in the post-pandemic economy, achieving and sustaining maximum employment will require more than supportive monetary policy,” Powell said. “It will require a society-wide commitment,” he added, stressing the importance of low-interest rates. “We will not tighten monetary policy solely in response to a strong labor market,” he added. This means they won’t hike rates until the recovery happens to all workforce sectors. During the last Fed reserve meeting, the Open Market Committee decided to retain interest rates at the current level of between 0 and 0.25%.
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$1.9 Trillion Package
The majority of Democrats are still working on details for their proposed $1.9 trillion stimulus package. This includes stimulus checks to American households and enhanced unemployment benefits. It also allotted funds for a federal vaccination program for COVID-19.
Republicans balked at the price tag, which they say would add to the national debt and cause more inflation. However, Federal Reserve policymakers supported the idea of prioritizing economic aid over debt and borrowing concerns. Despite the gradual recovery, Powell said that inflation levels continued to fall short of expectations.
Watch the CNBC News video where Federal Reserve Chairman Jerome Powell said the US unemployment rate is around 10% instead of the 6.3% rate reported:
Do you think unemployment numbers are higher than they seem? If this is the case, do you see the immediate need for more economic aid for Americans? Let us know what you think by sharing your comments below.