The U.S. labor market will see “ups and downs” as the pandemic lingers but it’s premature to judge that the recovery is in peril, said San Francisco Federal Reserve President Mary Daly.
“It’s too soon to say it’s stalling, but certainly we’re seeing the pain of Covid, and the pain of the delta variant,” Daly told CBS’s “Face the Nation” on Sunday. “Covid is not behind us, so I don’t expect the job market to just be continuous. It is going to have these ups and downs.”
U.S. nonfarm payrolls increased 194,000 last month, data on Friday showed, the smallest advance this year and well below expectations. The unemployment rate fell to 4.8%, partly reflecting a decline in the size of the labor force.
Daly, one of the U.S. central bank’s more dovish policy makers, is a voter this year on the rate-setting Federal Open Market Committee and must decide if underlying labor market improvement is sufficient to warrant beginning to scale back the Fed’s emergency pandemic support.
The FOMC left interest rates near zero at its September meeting and said that starting to scale back the central bank’s $120 billion in monthly asset purchases “may soon be warranted” if the economy continued to progress.
Chair Jerome Powell told reporters the process could start as soon as the Fed’s Nov. 2-3 meeting — its second last for 2021 — and the FOMC’s “substantial further progress” taper test for employment “is all but met.”
Daly sounded cautious on the economic outlook but not alarmed.
“Delta has taken a toll. But it hasn’t yet derailed us,” she said. “I don’t have a different view than I had on it when we first started. It’s going to be hard and as goes Covid, so goes the economy.”
She also acknowledged that Americans are feeling the strain of higher prices for “energy, food, basic services,” but said these pressures should fade over time.
“This is really hard. And it’s also really directly related to Covid. It’s related to the supply bottlenecks, to the disruptions,” she said. “But I don’t see this as a long-term phenomena.”