On Sunday, Treasury Secretary Janet Yellen expressed confidence of the US seeing full employment next year if the Congress were to pass President Joe Biden’s proposed stimulus package. However, she cautioned that the next few years would see elevated levels of unemployment rate without the additional $1.9 trillion in federal support.
She added that the Congressional Budget Office issued an analysis recently, and it showed that if additional support were not provided, the unemployment rate would remain at elevated for years to come. She added that it would take (until) 2025 to get the unemployment rate down to 4% again.
Yellen Says The US Could Reach Full Employment Next Year With Biden’s Stimulus Plan
According to commentators, her assessment comes as the White House is set to push the package through Congress, where it is expected to run into stiff Republican opposition over its price as also as some of its key elements. As the pandemic and its economic fallout continues to hurt Americans, lawmakers are under pressure to pass a relief package.
Full employment did not mean zero unemployment rate; rather, generally that employers had hired as many qualified professionals as they needed.
According to the January jobs report, even though 49,000 jobs were added last month, the US was still short of 10 million jobs from the pre-crisis level. The report further added that the unemployment rate declined to 6.3%, beating economists’ expectations. This marked the first decrease in two months.
According to the CBO’s report issued last week, the number of employed Americans would not return to its pre-pandemic level until 2024, a stark reminder of how long-drawn would be the recovery following the sharpest drop on record in April, with 20.5 million job losses and unemployment rocketing to 14.7% in a single month as the coronavirus hit the country.
Terming Biden’s plan as big enough to address the country’s full range of needs, she said it included a wide range of immediate assistance for struggling families, such as $1,400 stimulus checks. It also included unemployment, nutrition and eviction aid, as also longer-term changes, such as a $15 hourly minimum wage. However, the President recently conceded that the final proposal might not include the minimum wage proposal in view of the Senate’s rules.
Yellen said Sunday that the risk of Democrats’ plan causing inflation was worth taking. She had not seemed overly worried at the prospect of persistent inflationary pressures from the stimulus package.
She said her predecessor had indicated that there was a chance that this would cause inflation to rise, and that was also a risk that needed to be considered. Her observation came in response to criticism from Larry Summers, a former top economic adviser in the Obama administration.
In a column in The Washington Post last week, Summers wrote that the package was actually three times as large as the projected shortfall in economic output, as against the 2009 stimulus measure, which was was only half the size of the gap. He added that the package could cause the economy to overheat, setting off inflationary pressures, the kind that had not been seen in a generation.
Downplaying those concerns, Yellen, who was earlier chair of the Federal Reserve, said Sunday that the country had the tools to deal with that risk if it materialized.
She told Tapper that the US faced a huge economic challenge and tremendous suffering in the country. She added that needed to be addressed, and that was the biggest risk.
Responding to his column’s criticism in a separate piece, Summers wrote that history was not encouraging when it came to counting on the Fed to control the situation effectively if inflation started to rise.