Powell, speaking in a “60 Minutes” interview, also said that the coronavirus pandemic had exacerbated economic disparities in the United States and that this could take time to address during an uneven recovery.
In the interview, Powell described an economy that was at “an inflection point,” showing signs of acceleration but still facing numerous risks. By many measures, the economy is rebounding strongly, with the hopes that increased vaccinations and recent stimulus packages will chart a year of strong growth. The Dow Jones industrial average is at record levels and more than 900,000 jobs were added last month.
“There really are risks out there,” Powell told CBS News’s Scott Pelley. “And the principal one just is that we will reopen too quickly, people will too quickly return to their old practices, and we’ll see another spike in cases.”
Powell said previous waves of coronavirus cases hampered the recovery and urged caution as people get vaccinated and return to their normal routines.
He said the central bank was watching all these economic forces closely as it maps a path forward.
When it comes to monetary policy, the Fed has signaled it won’t raise interest rates from near zero until it sees substantial progress in the labor market. It could come under pressure from Wall Street and lawmakers to reconsider its stance if inflation picks up later this year once the expected economic rebound gains steam.
But Powell argues that the Fed shouldn’t pare back its support for the economy based on inflation expectations. The unemployment rate for the bottom 25 percent of wage earners is about 20 percent. Many low-wage service-sector jobs disproportionally employed women and people of color. Those jobs could be some of the last to return, as they depend heavily on person-to-person contact.
Then there is the challenge of whether many jobs that vanished in 2020 will return at all. Powell said the “economy that we’re going back to is going to be different from the one that we had,” making it that much harder for people to regain a foothold in the labor force.
“I think we need to keep in mind, we’re not going to forget those people who were left on the beach really without jobs as this expansion continues,” Powell said. “We’re going to continue to support the economy until recovery is really complete.”
The economy is a long way from healed. But Powell said the depths of the recession could have been much worse. He credited Congress’s swift, unanimous action through the Cares Act as being “a big feature of the landscape when people look back.”
Powell declined to answer whether he’d push for another round of stimulus. Last month, President Biden signed a massive $1.9 trillion coronavirus relief plan. The administration now has its eyes on a major jobs and infrastructure package.
Powell also would not say whether corporate and personal tax increases would slow growth. The White House is proposing tax increases that could pay for much of its next legislative push.
The Fed chair, whose term expires next year, also declined to say whether he’d want to be reappointed. The central bank has one open seat on its board of governors, and the Biden White House could have a major influence on the makeup of the central bank over the next four years.
For now, Powell’s message was one of growing optimism, without losing sight of how far there is still to go.
“We’ve got to remember there’s in the range of 10 million people who were working in February of 2020 and lost their jobs because of covid-19,” Powell said. “And they’re still not working. So, for them, it’s not over. And we’re going to keep those people in mind.”