benefits that a strong labor market can deliver and noted that many of these benefits only arose toward the end of the previous expansion. i also noted that these benefits were achieved with low inflation. indeed, inflation has been much lower and more stable over the past three decades than in earlier times. in addition, we have seen that the longer - run potential growth rate of the economy appears to be lower than it once was, in part because of population aging, and that the neutral rate of interest — or the rate consistent with the economy being at full employment with 2 percent inflation — is also much lower than before. a low neutral rate means that see jerome h. powell ( 2020 ), “ new economic challenges and the fed ’ s monetary policy review, ” speech delivered at “ navigating the decade ahead : implications for monetary policy, ” a symposium sponsored by the federal reserve bank of kansas city, held in jackson hole, wyo., august 27, https : / / www. federalreserve. gov / newsevents / speech / powell20200827a. htm. - 8our policy rate will be constrained more often by the effective lower bound. that circumstance can lead to worse economic outcomes — particularly for the most economically vulnerable americans. to take these economic developments into account, we made substantial revisions to our monetary policy framework, as described in the fomc ’ s statement on longerrun goals and monetary policy strategy. 11 this revised statement shares many features with its predecessor, including our view that longer - run inflation of 2 percent is most consistent with our mandate to promote maximum employment and price stability. but it also has some innovations. the revised statement emphasizes that maximum employment is a broad and inclusive goal. this change reflects our appreciation for the benefits of a strong labor market, particularly for many in low - and moderate - income communities. recognizing the economy ’ s ability to sustain a robust job market without causing an unwanted increase in inflation, the statement says that our policy decisions will be informed by our “ assessments of the shortfalls of employment from its maximum level ” rather than by “ deviations from its maximum level. ” 12 this means that we will not tighten monetary policy solely in response to a strong labor market. finally, to counter the adverse economic dynamics that could ensue from declines in inflation expectations in an environment where our main policy tool is more frequently constrained, we now explicitly seek to achieve inflation that averages 2 percent over time. this means that following periods when

##rs, eds., brookings papers on economic activity ( washington : brookings institution press, fall ), pp. 1 – 75, https : / / www. brookings. edu / bpea - articles / recessions - and - the - costs - of - job - loss ; kenneth a. couch and dana w. placzek ( 2010 ), “ earnings losses of displaced workers revisited, ” american economic review, vol. 100 ( march ), pp. 572 – 89 ; and louis s. jacobson, robert j. lalonde, and daniel g. sullivan ( 1993 ), “ earnings losses of displaced workers, ” american economic review, vol. 83 ( september ), pp. 685 – 709. - 6at the start of the pandemic, the increase in unemployment was almost entirely due to temporary job losses. 7 temporarily laid - off workers tend to return to work much more quickly, on average, than those whose ties to their former employers are permanently severed. but as some sectors of the economy have continued to struggle, permanent job loss has increased ( figure 9 ). so too has long - term unemployment. still, as of january, the level of permanent job loss, as a fraction of the labor force, was considerably smaller than during the great recession. research shows that the paycheck protection program has played an important role in limiting permanent layoffs and preserving small businesses. 8 the renewal of the program this year in the face of another surge in covid - related job cuts is an encouraging development. of course, in a healthy market - based economy, perpetual churn will always render some jobs obsolete as they are replaced by new employment opportunities. over time, workers and capital move from firm to firm and from sector to sector. it is likely that the pandemic has both increased the need for such movements and brought forward some movement that would have occurred eventually. 9 the bureau of labor statistics defines a job loss as temporary if the affected worker has been given a date to return to work or expects to be recalled to their former job within six months. for research on the effect of the paycheck protection program on employment, see david autor, david cho, leland d. crane, mita goldar, byron lutz, joshua montes, william b. peterman, david ratner, daniel villar, and ahu yildirmaz ( 2020 ), “ an evaluation of the pay