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Fed’s Charles Evans: Fed must be in it to win it on inflation objective

Yahoo Finance’s Brian Cheung joins Zack Guzman to break down Chicago Fed President Charles Evans latest comments out of the NABE conference.

Video Transcript

ZACK GUZMAN: Tomorrow, Fed Chair Jerome Powell is expected to speak. And of course, he's the prominent face of the Fed, the most important name attached to the Federal Reserve, of course. But today we got the update from Chicago Fed President, Charles Evans, speaking about the recovery and why he thinks that we're actually doing a little bit better than where he thought we would be, based on the current costs of the pandemic itself. And for more on that, I want to bring on Yahoo Finance's Fed reporter, Brian Cheung, who has the details around that point of view. Brian.

BRIAN CHEUNG: Well as you mentioned, Zack, Charlie Evans, the head of the Chicago Fed, speaking at a National Association of Business Economics conference this morning, saying that, given the death toll and the amount of cases of covid in this country, he's surprised the economy has done as well as it has so far in this recovery. Even though we still have over 10 million jobs to recover in this labor market. But, here's what he had to say about his current status of where the economy is.

CHARLES EVANS: I would have thought, if you'd told me that in June, which of these scenarios were you expecting. I would not have expected we would have seen a stronger growth now, as then. We seem to be powering through some horrific personal costs, and we're just going to have to see how that plays out and what the toll will be on consumer confidence going forward.

BRIAN CHEUNG: And those horrific personal costs that he was referring to, is the fact that there are about 40,000 cases a day, at the moment in the United States. It seemed like the Chicago Fed chief there expressing some skepticism that consumer confidence can hold up as well as it has so far. Keep in mind that when we look at the macro economic environment right now, it is indeed the case that unemployment has been falling. In fact, it was falling faster than the Federal Reserve's June projection of where would end the year. Now the Federal Reserve having to lower where it thinks unemployment will end the year. 7.9% was the most recent read as of the end of September. So it will be interesting to see if consumer confidence does deteriorate, and maybe things turn the other way. That does seem to be the concern, at least among one Fed official among those policymakers.

ZACK GUZMAN: When we think about the unemployment report, we got the jobs report and the unemployment rate in that report on Friday. It did drop, but it dropped because we saw a decline in the labor force participation rate. Something that is worrying, if you think about more people opting not to look for employment. And I'm not sure if it's going to be something you'd expect Jerome Powell to speak on tomorrow. But of course he has been pretty forward about why he thinks more needs to be done on the fiscal support side here, as he's basically pointed out a few times now, that monetary stimulus can only go so far.

BRIAN CHEUNG: Yeah, and that is the case. As you mentioned Jerome Powell, the Federal Reserve Chairman, will be speaking tomorrow, 10:40am, east coast time. He will be speaking on broadly quote, "The economic outlook," that's the subject that we have so far. Who knows what that could mean, but when he does speak it does, it will be his first remarks since we got that September jobs report. That's also, by the way, going to be the last jobs report that we get before the election.

So the Federal Reserve likely in view and it will be interesting to see, based off of what he saw in that jobs report, how does the Federal Reserve see the pace of this economy going? It does seem like the consensus on Wall Street is that the numbers from that September report do show the economic recovery slowing, which could be of grave concern. Especially as I mentioned earlier, we still have over 10 million jobs, a shortfall from pre-pandemic employment levels. And as you mentioned, the labor force participation rate also not looking so good, as people not only lose their jobs, but then also fall out of the labor force, which is defined as people actively looking for jobs. You have a lot of people simply giving up with the amount of business closures and the continued concerns about getting and contracting the virus itself. So, those are all things that could be weighing down the economy, and as Charlie Evans was hinting, could really hurt consumer confidence, which is such a huge and important driver of this economy.