U.S. is still in a ‘very significant recession’ despite job gains, Fed’s Rosengren says

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Job creation in August represents continued improvement in the U.S. economy but a full recovery won’t happen until the coronavirus pandemic is under control, Boston Federal Reserve President Eric Rosengren said Friday.

Unemployment fell to 8.4% as nonfarm payrolls rose by 13.7 million last month, the Labor Department reported, in numbers that were significantly better than Wall Street expectations. The jobless rate decline was particularly pronounced, sliding 1.8 percentage points from its July level as the labor market continues to heal.

While Rosengren acknowledged the “significant improvement,” he said the economy remains under pressure.

“We have a long way to go before we are fully recovered, but I will say this employment report was a very positive one,” he told CNBC’s Steve Liesman during an interview on “The Exchange.”

He noted that many of the gains were in the retail and hospitality sectors, both areas hard-hit during the pandemic as shoppers and diners stayed home due to government-imposed restrictions aimed at controlling the coronavirus spread.

Those areas have a long way to go before they are back to pre-pandemic levels, Rosengren added.

“At 8.4% unemployment, that is a very significant recession and I do think that it’s going to take quite a while to bring all those people back, particularly if it takes us a long time not only to get the pandemic resolved but also to get a workable and safe vaccine that is widely distributed,” he said. “I think it really is going to take that before we see a completely normalized market.”

For its part, the Fed has tried to boost the recovery through anchoring short-term interest rates near zero and implementing a slew of lending and liquidity programs. In addition, officials recently have outlined a new approach to inflation that effectively will keep rates pinned low until unemployment falls well below current levels.

Some market participants are expecting the Fed to further cement its position by outlining specific metrics it will need to see before raising rates. However, Rosengren said that’s not likely at least in the near future.

“We already are doing quite a lot in terms of stimulating the economy,” he said. “I think we’ll have to consider what’s appropriate forward guidance, but I think at this point the market understands that we’re not planning on raising rates anytime soon.”