Fed’s Bullard says U.S. could see rapid decline in unemployment

The U.S. labor market is likely to bounce back quickly as more temporarily furloughed workers return to jobs and the coronavirus pandemic comes under control, said Federal Reserve Bank of St. Louis President James Bullard.

“It’s very different labor market dynamics than what you are used to thinking about for recession,” Bullard said Friday as he took part in a virtual panel discussion with other central bankers. “There is a lot of prospect you can get fairly good labor market outcomes, continuing relatively rapid declines in unemployment and a good outlook therefore for the U.S. economy.”

The U.S. Treasury yield curve has been steepening in recent months, reflecting optimism of investors on the outlook for the economy, Bullard said. About $3 trillion in U.S. fiscal stimulus as well as ultra-easy monetary policy have helped support the recovery, while health-care outcomes have improved over time, he said.

As the economy picks up, “that will affect our crucial 10-year benchmark,” he said. “We’ll see if we get yield curve steepening going forward.”

While the U.S. continues to add jobs, the number of permanent job losers rose by 345,000 last month to a seven-year high of 3.8 million, while the number of Americans on temporary layoff fell by 1.5 million to 4.6 million.

Bullard, who doesn’t vote this year on monetary policy, has been among the most optimistic of Fed officials. He’s argued the recovery is likely to continue even with no more fiscal stimulus, while other Fed leaders have called for additional spending to support the expansion.