Dow edges up as Fed chief stresses need to brace economy, help workers regain jobs
Wall Street reversed losses and nudged the Dow Jones Industrial Average to another record as Federal Reserve Chairman Jerome Powell reaffirmed his view that the economy needs support.
Powell, testifying before Congress, said Wednesday the U.S. economy still had a long way to go to reach maximum employment and the Fed’s inflation target. Equity investors are weighing predictions for a post-pandemic surge in economic activity and corporate earnings with concerns that higher interest rates could dent the appeal of stocks.
The S&P 500 index rose 44.06 points to 3,925.43. The Dow climbed 424.51 points, or 1.4 percent to 31,961.86, an all-time high. The Nasdaq Composite added 132.77 points, or 1 percent, to 13,597.97.
The Fed chair, who had also testified before the Senate Banking Committee on Tuesday, studiously avoided commenting on specific government policy proposals during three hours of wide-ranging testimony before the House Financial Services
Committee. He also repeatedly refused to weigh in on the $1.9 trillion spending package the Biden administration has proposed or any of its individual provisions.
Investors are still anticipating another round of stimulus to help boost the economy. The House is likely to vote on President Joe Biden’s proposed stimulus package by the end of the week. It would include $1,400 checks to most Americans.
Powell did voice qualified support for a few broader ideas — like exploring better child-care options — and he stressed that in the near-term, it is critical to help workers who have been displaced from their jobs during the pandemic. He suggested that improved child care support policies from the government might help pull more women into the labor market.
Powell made it clear that the labor market remained far from healed, that the pandemic’s economic fallout has disproportionately hurt women and minorities, and that both Congress and the central bank have a
role to play in supporting vulnerable families until the economy has recovered more fully.
“Some parts of the economy have a long way to go,” he said Wednesday.
Women’s labor force participation had climbed for decades in the United States before stalling out — and then actually dropping slightly — starting in the 1990s. As Powell alluded to, adult women in the United States hold jobs or look for them at lower rates than women in some other major advanced economies, such as Canada or Germany.
Research has suggested that the divergence may be linked to child care policies. In a 2018 paper that asked why the share of Canadians who work or look for jobs had climbed even as United States labor force attachment had fallen, researchers at the Federal Reserve Bank of San Francisco pointed out that most of the gap owed to different outcomes for women. And they pointed to caregiving policy differences as a likely culprit.
“Parental leave policies in Canada provide strong incentives to remain attached to the labor force following the arrival of a
new child,” the paper, written by the San Francisco Fed president, Mary Daly, and co-authors, pointed out. “The contrast between the incentives Canada and the United States offer prime-age workers to remain attached to the labor force is clear.”
The fact that child care responsibilities fall heavily on women in the United States has come under a brighter spotlight during the pandemic, which has shuttered schools and disproportionately left women bearing added child care responsibilities during the traditional workday.
While women lost jobs less dramatically than men
during the 2009 recession, their employment rate is down by about as much as men’s during the pandemic crisis. And when it comes to labor force participation, which measures the share of people who are either working or looking, women have lost more ground.
Female participation dropped 2.1 percentage points to 55.7 percent in January, compared with February 2020, whereas men’s participation has dropped 1.7 points to 67.5 percent.
Powell noted the disproportionate impact Wednesday, saying that “women have taken on more of the child-care duties than men have at a time when kids are going to be at home, they’re not going to be at school in many places.”
While the Fed can help the economy and the job market to improve broadly, helping individual groups in a targeted way is generally left to elected officials, who can create more precise programs. That includes paving a clearer path to the labor market for mothers, which would mainly fall to Congress and the White House.
Still, the Fed can help to foster conditions for strong economic growth overall, which pulls people in the labor market and helps to set the stage for higher wages.
Officials are trying to do that by keeping interest rates low and buying large quantities of governmentbacked bonds to keep many types of credit cheap. The Fed’s explicit aim is to achieve both maximum employment and slow but steady inflation that averages 2 percent over time.
Powell signaled Wednesday that interest rates, which have been at rockbottom since March 2020, are likely to remain there for years to come.