With labor market recovery expected to be slow, monetary policy “accommodation will likely be appropriate for some time,” Federal Reserve Bank of Chicago president and chief executive officer Charles L. Evans said yesterday.
“Headline employment indicators appear to be roughly following a conventional track given the severity of the recession. But these measures may not fully capture the weakness displayed in the rising unemployment duration and the withdrawal of workers from the labor force,” Evans said at the NABE Economic Policy Conference, according to prepared text released by the Fed.
“These developments thus raise the risk that the recovery in labor markets could be slow even as output returns to a well-established growth path.”
However, given the “sheer magnitude of unemployment today,” Evans added, “there is little doubt in my mind that there is considerable slack in the economy. Incorporating alternative views about productivity and labor market behavior do not alter this general conclusion. The debate really boils down to whether the amount of slack in the economy is large or is extremely large.”
