Press conference exchange between RACHEL SIEGEL and Fed Chair Jerome Powell:

user: Hi, Chair Powell. Rachel Siegel from the Washington Post. Thank you for taking our questions. The projections show the unemployment rate rising to 4.4 percent next year, and, historically, that rise in the unemployment rate would typically bring a recession with it. Should we interpret that to mean no soft landing, and is that rise necessary to get inflation down?

assistant: Right. So you’re right—in the SEP, there’s what I would characterize as a relatively modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation. Now, why is that? So, really, that is what we generally expect because we see the current situation as outside of historical experience in a number of ways, and I’ll mention a couple of those. First—and these—but first, job openings are incredibly high relative to the number of people looking for work. It’s plausible, I’ll say, that job openings could come down significantly—and they need to—without as much of an increase in unemployment as has happened in earlier historical episodes. So that’s one thing. In addition, in this cycle, longer-run inflation expectations have generally been fairly well anchored, and, as I’ve said, there’s no basis for complacency there. But to the extent that continues to be the case, that should make it easier to restore price stability. And I guess the third thing I would point to that’s different this time is that part of this inflation is caused by this series of supply shocks that we’ve had, beginning with the pandemic, and, really, with the reopening of the economy, and more recently amplified and added to by Russia’s invasion of Ukraine—have all contributed to the sharp increase in inflation. So these are the kinds of events that are not really seen in prior business cycles, and, in principle, if those things start to get better—and we do see some evidence of the beginnings of that. It’s not much more than that, but it’s good to see that. For example, commodity prices look like they may have peaked for now; supply chain disruptions are beginning to resolve. Those developments, if sustained, could help ease the pressures on inflation. So let me just say, how much these factors will turn out to really matter in this sequence of events—it remains to be seen. We have always understood that restoring price stability while achieving a relatively modest decline—or, rather, increase—in unemployment and a soft landing would be very challenging. And we don’t know—no one knows whether this process will lead to a recession or, if so, how significant that recession would be. That’s going to depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored, and whether, also, do we get more labor supply, which would help as well. In addition, the chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive or restrictive for longer. Nonetheless, we’re committed to getting inflation back down to 2 percent—because we think that a failure to restore price stability would mean far greater pain later on.

user: Just to follow up on one small thing—are vacancies still at the top of your list in terms of understanding the labor market and how much room there is there?

assistant: Yes, vacancies are still almost a 2-to-1 ratio to unemployed people. That and quits are really very good ways to look at how tight the labor market is and how different it is from other cycles, where, generally, the unemployment rate itself is the single best indicator. We think those things have, for quite a time now, really added value in terms of understanding where the labor market is.