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Yellen warns US labour shortage may take years to resolve

·Business reporter
·3-min read
UNITED STATES - DECEMBER 1:Treasury Secretary Janet Yellen testifies during the House Financial Services Committee hearing titled Oversight of the Treasury Department's and Federal Reserve's Pandemic Response, in Rayburn Building on Wednesday, December 1, 2021. Federal Reserve Chairman Jerome Powell also testified. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)
“I’m frankly not worried about a downturn in the US economy as fiscal stimulus ebbs. I do think there’s going to be plenty of demand to support growth.” Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Janet Yellen, US secretary of the Treasury, has warned that some labour chain shortages could take a couple of years to resolve, while saying there was no evidence of a wage-price spiral.

Speaking to Martin Wolf, chief economics commentator at the Financial Times, she said there was no clear information to support worries that both a tight labour market and soaring prices will create a spiral effect that could spike inflation.

“I don’t see any evidence that that is happening,” she said at the Global Boardroom event on Tuesday. “But it would be appropriate for the Fed to take actions to make sure that doesn’t happen.”

Yellen also added that she was not concerned about the unprecedented levels of fiscal support injected into the US economy as it battles against the effects of the coronavirus pandemic.

“I’m frankly not worried about a downturn in the US economy as fiscal stimulus ebbs. I do think there’s going to be plenty of demand to support growth.”

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She added: “We had a real jolt of spending and fiscal stimulus in the year 2021 due to the American rescue plan and its predecessors, and that’s not going to be repeated.

“So we’re going to see in the years ahead fiscal drag rather than a repeat of that stimulus.”

However, inflation was still “the concern of the day” despite the labour situation being very unusual, she said. “A high quit rate signals a tight labour market; low labour supply is a mystery”.

The FT’s fourth edition of the Global Boardroom takes place virtually from 7 to 9 December, featuring live-streamed discussions and interviews on topics such as climate change, economics and geopolitics, the future of work, the future of finance, ESG, technology and more.

It comes just weeks after Yellen said controlling COVID-19 was the key to taming inflation.

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“It’s important to realise that the cause of this inflation is the pandemic. If we want to get inflation down, I think continuing to make progress against the pandemic is the most important thing we can do,” she said at the time.

The US consumer price index climbed 6.2% in October, according to the Bureau of Labour Statistics, the fastest increase since November 1990.

Biden’s overall approval rating fell to 41%, compared with 50% in June and 44% in September, in the latest Washington Post-ABC News poll.

This suggested that about half of American citizens overall, as well as political independents, blame Biden for soaring inflation.

Watch: What is inflation and why is it important?

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