Federal Reserve Chair Jerome Powell underscored the U.S. economy's ongoing weakness Tuesday in remarks that suggested that the Fed sees no need to alter its ultra-low interest rate policies anytime soon. (Feb. 23)
JEROME POWELL: The path of the economy continues to depend significantly on the course of the virus and the measures undertaken to control its spread. In recent weeks, the number of new cases and hospitalizations has been falling and ongoing vaccinations offer hope for a return to more normal conditions later this year. However, the economic recovery remains uneven and far from complete. And the path ahead is highly uncertain.
The overall recovery in economic activity since last spring is due in part to unprecedented fiscal and monetary actions, which have provided essential support to many households, businesses, and communities. As with overall economic activity, the pace of improvement in the labor market has slowed. Over the three months ending in January, employment rose at an average monthly rate of only 29,000. Continued progress in many industries has been tempered by significant losses in industries such as leisure and hospitality, where the resurgence in the virus and increased social distancing have weighed further on activity.
The unemployment rate remained elevated at 6.3% in January. And participation in the labor market is notably below pre-pandemic levels. Although there has been much progress in the labor market since the spring, millions of Americans remain out of work.
As discussed in the February Monetary Policy Report, the economic downturn has not fallen equally on all Americans. And those least able to shoulder the burden has been hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers and for African-Americans, Hispanics, and other minority groups.
The pandemic has also left a significant imprint on inflation. Following large declines in the spring, consumer prices partially rebounded over the rest of last year. However, for some of the sectors that have been most adversely affected by the pandemic, prices remain particularly soft. Overall, on a 12-month basis, inflation remains below our 2% longer-run objective.