Believe it or not, Fed Chair Jerome Powell is not the only person at the Fed who can make headlines. This week, Vice Chair Richard Clarida had some interesting things to say.

Clarida thinks it could take “another year or maybe more”, for GDP in the United States to recover to its previous 2019 peak. And given the dismal outlook that many members of the FOMC have had, my natural reaction is: Just one year? Not bad, we’ll take it.

But just like every positive statement that comes out of the Fed these days, it was met with many qualifiers. And if I had to pick the most important one, it has to be Clarida’s outlook for the labor market.

He thinks it will take even longer for the unemployment rate to return to a level consistent with the Fed’s maximum employment mandate. In particular, he highlighted that even over six months since the pandemic’s onset, the unemployment rate is still at 7.9 percent as of September and would be about 3 percentage points higher if labor force participation remained at February 2020 levels. Yikes.

Clarida also noted that “additional support from monetary-and likely fiscal-policy” will be needed. Economist Tim Duy sees this as a hint that the Fed is gearing up for something new in the coming months. I think he is well reasoned...

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