to fall more quickly in expansions. 4 over the course of a long expansion, these persistent disparities can decline significantly, but, without policies to address their underlying causes, they may increase again when the economy ultimately turns down. these late - breaking improvements in the labor market did not result in unwanted upward pressures on inflation, as might have been expected ; in fact, inflation did not even rise to 2 percent on a sustained basis. there was every reason to expect that the labor market could have strengthened even further without causing a worrisome increase in inflation were it not for the onset of the pandemic. for a description of labor market outcomes by race and ethnicity over the business cycle, see stephanie r. aaronson, mary c. daly, william l. wascher, and david w. wilcox ( 2019 ), “ okun revisited : who benefits most from a strong economy? ” in james h. stock and janice eberly, eds., brookings papers on economic activity ( washington : brookings institution press, spring ), pp. 333 – 75, https : / / www. brookings. edu / bpea - articles / okun - revisited - who - benefits - most - from - a - strong - economy ; and tomaz cajner, tyler radler, david ratner, and ivan vidangos ( 2017 ), “ racial gaps in labor market outcomes in the last four decades and over the business cycle, ” finance and economics discussion series 2017 - 071 ( washington : board of governors of the federal reserve system, june ), https : / / doi. org / 10. 17016 / feds. 2017. 071. - 4the labor market today the state of our labor market today could hardly be more different. despite the surprising speed of recovery early on, we are still very far from a strong labor market whose benefits are broadly shared. employment in january of this year was nearly 10 million below its february 2020 level, a greater shortfall than the worst of the great recession ’ s aftermath ( figure 5 ). after rising to 14. 8 percent in april of last year, the published unemployment rate has fallen relatively swiftly, reaching 6. 3 percent in january. but published unemployment rates during covid have dramatically understated the deterioration in the labor market. most importantly, the pandemic has led to the largest 12 - month decline in labor force participation since at least 1948. 5 fear of the virus

of our securities portfolio without increasing its size. the fomc has indicated that it will continue purchases until it observes a substantial improvement in the outlook for the labor market in a context of price stability. the committee also stated that in determining the size, pace, and composition of its asset purchases, it will take appropriate account of their likely efficacy and costs. in other words, as with all of its policy decisions, the committee continues to assess its program of asset purchases within a cost - benefit framework. in the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear : monetary policy is providing important support to the recovery while keeping inflation close to the fomc ’ s 2 percent objective. notably, keeping longer - term interest rates low has helped spark recovery in the housing market and led to increased sales and production of automobiles and other durable goods. by raising employment and household wealth – for example, through higher home prices – these developments have in turn supported consumer sentiment and spending. highly accommodative monetary policy also has several potential costs and risks, which the committee is monitoring closely. for example, if further expansion of the federal reserve ’ s balance sheet were to undermine public confidence in our ability to exit smoothly from our accommodative policies at the appropriate time, inflation expectations could rise, putting the fomc ’ s price - stability objective at risk. however, the committee remains confident that it has the tools necessary to tighten monetary policy when the time comes to do so. as i noted, inflation is currently subdued, and inflation expectations appear well anchored ; neither the fomc nor private forecasters are projecting the development of significant inflation pressures. another potential cost that the committee takes very seriously is the possibility that very low interest rates, if maintained for a considerable time, could impair financial stability. for example, portfolio managers dissatisfied with low returns may “ reach for yield ” by taking on more credit risk, duration risk, or leverage. on the other hand, some risk - taking – such as when an entrepreneur takes out a loan to start a new business or an existing firm expands capacity – is a necessary element of a healthy economic recovery. moreover, although accommodative monetary policies may increase certain types of risk - taking, in the present circumstances they also serve in some ways to reduce risk in the system, most importantly by strengthening the overall economy, but also by encouraging firms to rely more on longerterm funding, and