- Concerns about the highly contagious COVID-19 Delta variant are holding millions back from returning to work, Neel Kashkari said Sunday.
- That could drag on the US labor market recovery, the Minneapolis Fed president told CBS.
- The sooner vaccinations bring Delta under control, the better off the economy will be, the Fed policymaker said.
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As many as 9 million Americans are holding back from returning to work as the highly contagious Delta variant spreads, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Sunday.
That reluctance could slow the US labor market’s recovery, the Fed official told CBS’s chief political analyst John Dickerson on “Face the Nation.”
“We believe that they’re out of work because they’ve been nervous about COVID, because of childcare issues, because of these enhanced unemployment benefits,” Kashkari said.
The Delta variant is the most common source of new cases in the US, with only two states at low risk of infections from it – Massachusetts and Vermont. Over the past two weeks, COVID-19 cases have increased by 148%, hospitalizations by 73%, and deaths by 13% in the US, according to a New York Times database.
The Federal Reserve policymaker said he had hoped the job market would revive in the fall with millions going back to work, and he still expects that to be the case.
“But if people are nervous about the Delta variant, that could slow some of that labor market recovery and therefore be a drag on our economic recovery,” he said. “So the sooner we can get people vaccinated, the sooner we can get Delta under control, the better off our economy is going to be.”
Kashkari is one of the more dovish members of the Fed’s Federal Open Market Committee, which manages the nation’s money supply by setting monetary policy.
The labor market is one of the most important measures of slack in the US economy. When businesses run out of people to hire, wages rise, and that risks setting off an inflationary spiral.
Vaccine distribution and the reopening of the US economy have pushed jobless claims to a pandemic-era low of 400,000 as people take up roles. But nearly 10 million people remained unemployed by the end of June this year.
Over the past few months, rising inflation has awakened fears that the Fed would have to rein it in by raising rates aggressively.
Kashkari, like most Fed officials, believes the current high level of inflation is transitory. They believe it is being driven by large price increases for a few industries – like autos, travel, and transport – that are coming back from pandemic-related inactivity, not the economy as a whole.
If the COVID-19 pandemic had not occurred, the US economy would likely have kept adding jobs in 2020, Kashkari said.
“The last recovery took 10 years to put everybody back to work,” he said, possibly in reference to the aftermath of the Great Recession. “We cannot have another 10-year recovery.”