Powell Dances Through Border Politics
Federal Reserve Chairman Jerome Powell returned to Capitol Hill on Wednesday to submit to Congress’s semi-annual inquiry into central banking in which much is asked and little is answered.
The blend of the pertinent and the peripheral was no better or worse than typical, reflective of the broader cacophony that characterizes our public discourse. Powell persuasively executed his requisite evasive pirouettes around the probes of policy makers that meandered far from the concerns of monetary policy into realms more suited for a civics discussion than an economic briefing.
In an intriguing interlude that veered off the expected script, Powell pointedly declined to defend the establishment view that immigration is a boon for the economy and more immigration even better. The Fed chair was asked by Rep. Sylvia Garcia (D-TX) to expound upon her view that immigrants “have been fueling our national growth.” She pointed to a report by the Congressional Budget Office (CBO) which claimed that the ongoing surge of immigration to the United States would boost the economy by $7 trillion over the next decade.
It would have been easy enough for Powell to endorse the CBO report. Instead, he offered a remark that was much more circumspect —acknowledging the arithmetic obviousness that more workers equate to more growth, yet artfully sidestepping any normative judgment about such outcomes.
“It’s just arithmetic. If you add a couple of million more people to the economy and a percentage of them will work, then there will be more output,” Powell said, adding that the Fed did not comment on or make immigration policy.
Rep. Garcia pressed the question further. “I am simply asking if you agree that the immigration surge has contributed to our strong labor force, which is necessary,” she said.
Powell replied that last year there was growth in the labor force due to both an increase in labor force participation and immigration. But was it necessary? “I’m not going to say anything is necessary for the future of policy, either directly or indirectly,” Powell said.
In other words, far from lauding the immigration surge as necessary or even desirable, Powell kept his commentary squarely within the realm of economic observation, not policy prescription.
The Fed Is Still Looking For Greater Confidence
Turning to the heart of the matter, interest rates, it would appear that not a whit had changed since Powell’s previous press conference convocation in January, and this in itself was the message: the Federal Reserve demands a more robust tableau of data before contemplating any alteration to the current rate schema.
The consequential inference for those speculating about rate adjustments was unequivocal: realign your expectations further into the future, for no immediate alteration looms on the horizon. The latest Job Openings and Labor Turnover Survey (JOLTS) did nothing to perturb this outlook, portraying as it did a labor market in equipoise.
Federal Reserve Governor Chris Waller recently posited that there exists no exigency to adjust rates. On Wednesday, we could discern in Powell’s comportment a shared disposition. Powell may be a fan of jam bands, but he is not a man beguiled by the siren song of precipitate action.
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