- The US could reach full employment in 2022 thanks to Democrats’ stimulus plan, Sec. Yellen said.
- The relief package can “really fuel a very strong economic recovery,” Yellen told MSNBC.
- Yellen also dispelled concerns of the $1.9 trillion package sparking rampant inflation.
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One of the slowest-recovering sections of the US economy can return to pre-pandemic health as early as next year, Treasury Secretary Janet Yellen said Monday.
That would be the labor market.
While business output and retail sales have all trended higher in recent weeks, job growth continues to lag behind the overall recovery. Friday’s jobs report, while stronger than expected, still shows roughly 10 million Americans out of work. Weekly jobless claims remain at elevated levels. And the “real” unemployment rate, which measures people who have stopped looking for work, stands at around 9% after Friday.
Yellen sees the stimulus changing that, telling MSNBC that the $1.9 trillion stimulus plan moving through Congress will play a critical role in boosting demand and reinvigorating job creation.
“We expect the resources [in the bill] to really fuel a very strong economic recovery,” Yellen said. “I’m anticipating, if all goes well, that our economy will be back to full employment – where we were before the pandemic – next year.”
Senate Democrats approved the new relief package on Saturday, and the House is expected to vote on the last version before President Joe Biden signs it on Tuesday. Biden is overwhelmingly likely to be able to sign it into law before expanded unemployment benefits expire on March 14.
To be sure, “full employment” is different from the “maximum employment” target sought by the Federal Reserve. The central bank has indicated it won’t rein in its ultra-easy monetary policy until wage growth improves and the unemployment rates for minorities and low-income groups fall.
Yellen also dispelled concerns that inflation would run rampant as new stimulus hits households. Direct payments and the unemployment-insurance supplement included in the measure are likely to lift consumer spending and, in turn, lead businesses to raise prices. Republicans have argued the relief plan will lead the economy to overheat, but the Treasury Secretary isn’t concerned.
“I really don’t think that is going to happen,” Yellen said.”We had a 3.5% unemployment rate before the pandemic and there was no sign of inflation increasing.”
The comments come as Treasury yields hover at their highest levels since February 2020. Expectations for strong growth and higher inflation have led investors to dump government bonds and shift cash to sectors best positioned to thrive through the economic recovery.
The rapid leap in Treasury yields jostled markets and caught the Fed’s attention. Central bank officials have so far only made soft comments regarding the sell-off, but some on Wall Street are preparing for the Fed to further clarify its inflation expectations when policymakers meet on March 17.