The weak U.S. jobs report in April underscores the value of the Federal Reserve's patient policy approach to achieve the central bank's inflation and employment goals, a senior Fed official said on Tuesday.
"The outlook is bright, but risks remain, and we are far from our goals. The latest employment report reminds us that realized outcomes can diverge from forward projections and underscores the value of patience," Fed governor Lael Brainard said during a virtual conference sponsored by the Society for Advancing Business Editing and Writing.
"As the economy reopens fully and the recovery gathers momentum, it will be important to remain patiently focused on achieving the maximum-employment and inflation outcomes in our guidance," Brainard said.
Brainard's remarks came after the Labor Department reported last week that U.S. employers added 266,000 jobs in April, far fewer than economists' estimates of 1 million new jobs, with the unemployment rate little changed at 6.1 percent.
"As of the latest reading, there is an employment shortfall of 8.2 million relative to the pre-pandemic level, and the employment shortfall is over 10 million if we take into account the secular job growth that would have occurred over the period since February 2020 in normal circumstances," she said.
Brainard also noted that job losses are disproportionately concentrated in low-wage, high-contact sectors, suggesting that the workers least able to shoulder the economic effect of job loss have faced the greatest challenges.
"Despite the more than 900,000 jobs gained in the leisure and hospitality sector in the first four months of 2021, jobs in this sector remain nearly 3 million below their pre-COVID level," she said.
While the path of inflation is difficult to predict, there are a variety of reasons to expect an increase in inflation associated with reopening that is "largely transitory", according to Brainard.
"I will remain attentive to the risk that what seem like transitory inflationary pressures could prove persistent as I closely monitor the incoming data. Should this risk manifest, we have the tools and the experience to gently guide inflation back to our target," she said.
The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until the economic recovery makes "substantial further progress."