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White House Council of Economic Advisers head on the economic issues the U.S. faces


President Biden is betting on the current chair of the Federal Reserve. He renominated Jerome Powell to another four-year term earlier today. This comes as the administration is dealing with economic uncertainty because of the pandemic and with inflation that is at a 30-year high. To talk more about all of this, we're joined now by Cecilia Rouse. She is the chair of the Council of Economic Advisers.


CECILIA ROUSE: Thank you for having me.

CHANG: Thanks for being with us. All right, let's start with Jay Powell and the economy that he's presiding over right now. As we mentioned and as you know all too well, inflation is a real problem right now. The pandemic is still affecting the economy in lots of other ways. Tell us - why does President Biden want the same man to stay on this job?

ROUSE: Well, I think that's an excellent question. It's important to keep in mind that progress our economy has made over the last 10 months. Since the president took office, we've created almost 6 million jobs. Unemployment is down 4.6%. We are making steady progress. We are getting through this pandemic thanks to the American Rescue Plan, which - the most important part of that was getting the vaccination out to people. And I encourage everybody to get a booster shot if they haven't already gotten one and they're eligible. But it's due to the strength of that recovery that the U.S. is leading the world on the recovery.

And that's also, you know, no small feat due to the actions of the Fed; which is the Fed has understood that we needed to be accommodative. We did not have a financial crisis during historic downturn. And so we understand that getting out of a pandemic and the economic crisis it caused has caused, yes, some disruption and inflation. The president understands the pain of inflation.

Nobody - the president, Jerome Powell - wants to see inflation. But he has full faith and confidence that Jerome Powell, along with Lael Brainard, have the tools and they understand how to get us through this - the inflationary period while also achieving the goal of maximum employment...

CHANG: Well, let me ask you...

ROUSE: ...For all people.

CHANG: Let me ask you - 'cause some Senate Democrats like Elizabeth Warren of Massachusetts, Jeff Merkley of Oregon, Sheldon Whitehouse of Rhode Island - these Democrats are saying that they are going to oppose Powell's nomination. I mean, Senator Warren has called Powell, quote, "a dangerous man." Why is the president so confident that Powell is the right man for this job when there is such strong opposition among some members of his own party?

ROUSE: Well, he wouldn't have renominated Chair Powell if he wasn't certain that Powell will protect the economy from the bad behavior of Wall Street, right? Over the past four years, his - Powell's track record - and he's navigated us - has been strong. And he's navigated us through this unprecedented crisis. It's really important that the Federal Reserve maintain its focus on a strong labor market, and it's important that we have strong safeguards against the banks.

But, you know, Chris Dodd, Barney Frank - two legislators who brought in the, you know, the Dodd-Frank reform of Wall Street after the 2008 crash - have endorsed Powell as well. So Powell has a steady hand as we're going through the choppy waters of getting out of this pandemic-induced economic crisis.

CHANG: I want to turn you to inflation because that is probably the biggest priority right now. How does Powell bring down inflation without disrupting the economy further? What do you think?

ROUSE: Well, I think Chair Powell is doing the right thing, which is he's trying to understand what is the source of inflation. He's, you know, actively monitoring the data. And one of the things that we can see is a lot of it is due to the strong support we gave to households, so demand has been strong. And households have shifted their, you know, demand. They're buying things instead of buying services. And things go through ports. They have to be built. And that is causing the bottlenecks in the supply chain.

So Jerome Powell - Chair Powell is keeping his eye on those data, understands what the potential of the Fed is in, you know, potentially addressing that. We know the President Biden has gotten an aggressive agenda...

CHANG: That said...

ROUSE: ...To increase capacity at the ports. So this is to say that he is watching the data. And he - you know, they've already signaled they're going to start unwinding their support, you know, in the financial sector, and they've also signaled their willingness to increase interest rates when that becomes appropriate.

CHANG: I do need to ask, though, because you as well as other members of this administration have said that inflation - right now, it's transitory, that it will get better. It continues to climb. So when do you expect that we will see a break in these high inflation rates?

ROUSE: Well, I - we really do expect to see inflation - to break in the next year. So, you know, possibly in the second quarter of next year, second or third quarter. As the supply chains ease, as people start to feel more comfortable because the pandemic is receding, they're using more services rather than buying goods, we expect to see that normalization in our economy will help to moderate the inflation.

Yes, it's disruptive. It's painful. The president understands that. Chair Powell understands that. But - you know, and they're watching it and they are doing what they can to help us get through this just as quickly.

CHANG: I mean, how patient should the Federal Reserve be in addressing inflation while millions of people are still out of work?

ROUSE: So the Fed is an independent entity, and the president and I, as the chair of economic - the CEA, fully respect the independence of the Fed. But I have full faith and confidence that they are watching the data. They have their Federal Reserve Bank. They have data on the ground. They are - they're trying to monitor the situation. I know on our side, we are doing what we can to try to, you know, ease constraints in the supply chain and to help people get back to work.

CHANG: Well, about that data, if I could ask you, can we just dig into that? How close is the U.S. to full employment right now?

ROUSE: Well, we know that we're at - unemployment at 4.6%. We are - it's quite low. But at the same time, we also know that our labor supply is not back to where it was pre-pandemic. So we know that there's still some what we would say slack. We still need to be getting more people back to work. And I have full confidence that as we get through this pandemic, as schools are more stabilized, you know, as the economy picks up, more people will be going back to work and we'll be reaching full recovery.

CHANG: Well, I ask about full employment because the Fed says it wants to get back to full employment - or it wants to see full employment before raising interest rates. So what does full employment look like in a post-pandemic world, do you think?

ROUSE: Well, I think that's what they're trying to establish. And again, I don't want to try to prejudge the Fed. But what they're going to want to see, I would imagine, is not just that the unemployment rate is low, but that we see greater participation. And importantly, according to their new framework, they want to see that that low unemployment is more broadly shared, that has been in the past (ph).

So again, the Fed has signaled that they are prepared to start easing up on some of its accommodative policies, and they will do so as they see appropriate because it is independent. But, you know, they're going to be looking to see not only that unemployment is low, you know, on average, but shared and that people are participating in the labor market.

CHANG: What if people who left the workforce don't end up coming back?

ROUSE: Well, some - you know, I have full faith that not - I don't expect everyone to come back. Part of the reason why we see some people not participating, say, retired early. But I know we have far more people who will want to come back once they know it's safe to participate in the labor force, once they have child care that is stable and reliable and when they feel confident that they can, you know, get back to the work that they find meaningful and fulfilling.

CHANG: That is Cecilia Rouse, chair of the Council of Economic Advisers.

Thank you very much for speaking with us today.

ROUSE: You're very welcome.

(SOUNDBITE OF DOVES SONG, "COMPULSION") Transcript provided by NPR, Copyright NPR.

Ailsa Chang is an award-winning journalist who hosts All Things Considered along with Ari Shapiro, Audie Cornish, and Mary Louise Kelly. She landed in public radio after practicing law for a few years.
Courtney Dorning has been a Senior Editor for NPR's All Things Considered since November 2018. In that role, she's the lead editor for the daily show. Dorning is responsible for newsmaker interviews, lead news segments and the small, quirky features that are a hallmark of the network's flagship afternoon magazine program.