NICK TIMIRAOS. Nick Timiraos, the Wall Street Journal. Chair Powell, the
unemployment rate at 3.6 percent in March is now essentially at the level that the Committee had
expected would prevail over the next three years and at the bottom end of FOMC participants’
projections for the longer-run rate that you submitted in the projections at the last meeting. How
has your outlook for further declines in the unemployment rate changed since March? What
does this imply for your inflation forecast? And how has your level of confidence changed with
regard to the feasibility of slowing hiring without pushing the economy into recession? Thanks.

CHAIR POWELL. Thank you. So you’re right—3.6 percent unemployment is just
about as low as it’s been in 50 years. And I would say that I expect, and Committee members
generally expect, that we’ll get some additional participation. So people will be coming back
into the labor force. We’ve seen that particularly among prime-age people. And that will, of
course, tend to hold the unemployment rate up a little bit. I would also expect, though, that job
creation will slow. Job creation has been, you know, more than half a million per month in
recent months—very, very strong, particularly for this stage of the economy. And so we think—
with fiscal policy less supportive, with monetary policy less supportive, we think that job
creation will slow as well. So it is certainly possible that the unemployment would go down
further. But so I would expect those to be relatively limited because of the additional supply and
also just the slowing in job creation.

Implications for inflation—really, the wages matter a fair amount for companies,
particularly in the service sector. Wages are running high, the highest they’ve run in quite some
time. And they are one good example, or good illustration, really, of how tight the labor market
really is, the fact that wages are running at the highest level in many decades. And that’s
because of an imbalance between supply and demand in the labor market. So we think through
our policies—through further healing in the labor market, higher rates, for example, of vacancy
filling and things like that, and more people coming back in—we’d like to think that supply and
demand will come back into balance and that, therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2 percent inflation. That’s our expectation.

Your third question was?

NICK TIMIRAOS. Your level of confidence that you can slow hiring without pushing
the economy into a downturn.

CHAIR POWELL. So I guess I would say it this way: There’s a path. There’s a path by
which we would be able to have demand moderate in the labor market and therefore have
vacancies come down without unemployment going up, because vacancies are at such an
extraordinarily high level. There’re 1.9 vacancies for every unemployed person, 11.5 million
vacancies, 6 million unemployed people. So we haven’t been in that place on the vacancy, sort
of the vacancy/unemployed curve, the Beveridge curve. We haven’t been at that sort of level of
a ratio in the modern era. So, in principle, it seems as though by moderating demand, we could
see vacancies come down and, as a result—and they could come down fairly significantly and, I
think, put supply and demand at least closer together than they are. And that would give us a
chance to get inflation down, get wages down, and then get inflation down without having to
slow the economy and have a recession and have unemployment rise materially. So there’s a
path to that.

Now, I would say, I think we have a good chance to have a soft or softish landing or
outcome, if you will. And I’ll give you a couple of reasons for that. One is, households and
businesses are in very strong financial shape. You’re looking at, you know, excess savings on
balance sheets—excess in the sense that they’re substantially larger than the prior trend.
Businesses are in good financial shape. The labor market is, as I mentioned, very, very strong.
And so it doesn’t seem to be anywhere close to a downturn. Therefore, the economy is strong
and is well positioned to handle tighter monetary policy. So, but I’ll say, I do expect that this

will be very challenging; it’s not going to be easy. And it may well depend, of course, on events
that are not under our control. But our job is to use our tools to try to achieve that outcome, and
that’s what we’re going to do.