Rep. Jim Jordan (R-OH) grilled Federal Reserve Chair Jerome Powell on Tuesday afternoon about high inflation and high unemployment in the United States.
Powell testified before the House of Representatives’ Subcommittee on the Coronavirus Crisis to discuss the United States’ economic recovery following COVID-19 and the lockdown-induced recession. In prepared remarks, he emphasized rising vaccination rates, improving GDP projections, and growing consumer expenditures.
Powell admitted that inflation rates are rising and “participation in the labor market has not moved up from the low rates that have prevailed for most of the past year” — a reality relevant to the Fed’s “dual mandate to promote maximum employment and stable prices for the American people.”
During his questioning time, Jordan immediately challenged Powell on the policies affecting the Fed’s ability to carry out its mandate.
— Rep. Jim Jordan (@Jim_Jordan) June 22, 2021
JORDAN: Chairman Powell, the Fed has two mandates, right?
POWELL: Maximum employment and stable prices.
JORDAN: Maximum employment and stable prices. Seems like both have got some problems today… why are the jobs numbers so bad right now?
POWELL: Well, I think we’re digging out of a very deep hole. We’ve made a lot of progress, but I would agree with you — we have a long way to go.
JORDAN: Over 9 million job openings over the past two months, only 800,000 jobs added back. That’s pretty bad. Is there a specific reason you point to as why those numbers aren’t where we would frankly hope they would be?
POWELL: It’s a good question. My thinking is that there are some temporary factors that are weighing on job creation… actual hiring is at very high levels, but it’s being offset by high levels of quits and retirements… What’s happening is that the net job creation has been lower, but actual hiring is high…
JORDAN: What about the unemployment benefits? Does that factor in as well?
POWELL: It may be a factor, and it’ll be a temporary one because something like 15 million people will see either those benefits disappear or significantly decrease.
Jordan again asked Powell whether enhanced federal unemployment benefits are preventing Americans from seeking jobs, remarking that nearly all employers in his district are having a difficult time filling positions.
JORDAN: You think it’s more of quitting and retirements, or you think it’s more unemployment, or a combination, or what is it?
POWELL: In terms of things that are weighing on people getting in the labor force, I think it’s the three things I mentioned. It’s still some people afraid of COVID — maybe they’re living with someone who’s vulnerable. It’s also schools are closed, and having schools be open again will free up a lot of caretakers. I think unemployment benefits, too. You would expect a significant — a really strong set of jobs numbers coming up, beginning in the next month.
JORDAN: Didn’t you expect higher numbers in April and May?
POWELL: Yeah, I did.
JORDAN: I guess when you pay people not to work, you shouldn’t be surprised when you don’t have workers.
Jordan then referenced twenty-five Republican governors’ decisions to opt out of enhanced federal aid — what he said was the first instance in his three-decade political career in which he’s seen governors turned down federal money.
He then asked whether high unemployment would continue if Democrats renew the enhanced benefits before their current September expiration date.
JORDAN: If they renew them, won’t that hurt?
POWELL: These are judgments for people who stand for election.
JORDAN: No, I’m just following your logic. You said if it runs out, that will help the employment situation.
POWELL: I think we’ll see strong job creation in the fall. I really do. As you pointed out, 9.3 million job openings, many millions of people unemployed. There seems to be some kind of a speed limit. It may just be that it’s hard to match up with a new job, and people feel like they can wait a little bit longer and really shop carefully.
Jordan then pivoted to the issue of rising inflation.
JORDAN: As you said, you’ve got two mandates at the Fed: stable employment and low unemployment. We’ve got unstable employment, we’ve got high inflation… on top of all that they’re thinking about raising taxes. This is amazing to me — first you pay people not to work, then the folks who are working, you’re going to raise their taxes… what do you think about all these policy ideas from the Democrats?
POWELL: Again, it’s not my job.
JORDAN: No, but your job is stable employment and low inflation. Right now we have 9 million job openings and inflation that’s went up five months in a row… I’m not necessarily blaming you. I’m blaming the Democrat policies… it seems to me, they’re doing everything wrong, making your job that much harder.
Last week, the Fed dramatically raised its inflation projection from 2.4% to 3.4% for 2021. Nevertheless, the Fed will pursue near-zero interest rates and continue to buy $120 billion in Treasury bonds and mortgage-backed securities every month — measures that will increase the supply of money in the United States economy.
Likewise, the Department of Labor observed an unexpectedly high uptick in jobless claims for the week ending in June 12 — a trend entirely driven by California and Pennsylvania, both of which continue to accept enhanced federal unemployment insurance.
This article has been revised for clarity.