Press conference exchange between JEANNA SMIALEK and Fed Chair Jerome Powell:

user: I was wondering if you could follow up a little bit on your response to Rachel at the very beginning and talk a little bit about how we should understand what full employment means in a world that as you mentioned is pretty roiled All the data is pretty—has been pretty roiled by the pandemic and we’re not really sure where EPOP is going to settle in we’re not sure where participation is going to settle in And wages are already looking decent So I guess I wonder what full employment means in this context how you’re thinking about those wage data

assistant: Yeah. As, as you well know, there isn’t one indicator we can look to, and there’s no one number that we can therefore point to. We look at a range of indicators, and it’s a very broad range, you can count to a high number just quickly—but, but, certainly, it will include things like unemployment and participation and wages and many different flavors of that. So how do we think about it? A couple of things. We’re all going to be informed by what we saw in the last cycle, which was labor supply outperforming expectations over a long period of time. Now, that hadn’t happened in many other cycles, but this was a very long cycle. So we’re going to have to be alert to see whether that can happen again. It is a different—it’s a different economy. We, we have had a slew of retirements, and that may weigh on participation. That, that effect, though, should wear off in a few years and, and, you know, as you move through that window, because they would have—people would have retired anyway, and you’ll be back where you, you would have been. So I think we’re—I think that lesson number one is, is just to be careful about assessing maximum employment. And I think if you—during the last cycle, there were—there were waves of concern that we were reaching full employment as early, you know, as, as 2012, when I arrived at the Fed. And, you know—you know, nine years later— eight years later, we were still creating jobs. And, you know, it was quite remarkable. So we’re all going to be informed by that. At the same time, we understand this is a different economy. You know, the, the demographics are, people are getting older, and that should have a secular effect of, of reducing participation over time. So we have to be sensible about what, what can be done. But I think we’re going to be—we’re going to lean into that and be optimistic. You asked about wages. You know, we’re seeing wage increases. That’s, that’s a natural thing to be seeing in a strong economy. And what we’re seeing is—we don’t see anything that’s troubling in the sense of—what would be troubling would be, you know, very wide across the economy, wages at unsustainable levels without high inflation. In other words, wages in excess of productivity and inflation, you know, by a meaningful amount broadly across the economy, forcing companies to keep raising prices and getting into a wage–price cycle. That’s, that’s the old formula for—one of the old formulas for having high inflation. We don’t see anything like that now. We do see high wages. We see them for, for people who are mostly new, you know, entering into new jobs, many of them in low-skilled jobs. And, but we, we do think—you’ve got to—you’ve got to think in the labor market right now, where, where supply and demand are just not matched up well. And, you know, we think it’s a flexible economy and, and it will clear. There will—there will be a level at which supply and demand meet. And that’ll—we think that’ll, that’ll be happening in coming months. So—but the last thing I’ll say is, again, if you look at, at the forecasts, we are going to be in a very strong labor market pretty quickly here. There are still a big group of unemployed people. And, you know, we’re not going to forget about them. We’re going—we’re going to do everything we can to get people back into work and give them the chance to work. But there’s every reason to think that we’ll be in a—in a labor market with very attractive numbers, with low unemployment, high participation, and rising wages across the spectrum. So that’s, that’s a little bit how we’re looking at the—at the labor market.