Democratic Sen. Elizabeth Warren, the most outspoken critic of Federal Reserve policy in Congress, said Wednesday that the central bank’s decision to continue raising interest rates into 2023 risks “throwing millions out of work,” a warning that came shortly after Fed Chair Jerome Powell acknowledged the U.S. unemployment rate will likely rise in the coming months.
“Chair Powell has a dual mandate: to bring inflation down and keep unemployment low,” Warren wrote on Twitter. “But his rate hikes risk throwing millions out of work. He should remember that the people who’ll lose their jobs aren’t stockbrokers and CEOs, it’s working people who need that paycheck every week.”
At congressional hearings, on social media, in op-eds in major newspapers, and in direct communications with Powell over the past six months, Warren has repeatedly warned that the Fed’s aggressive interest rate hikes could do more harm than good, needlessly manufacturing a recession while doing nothing to tackle the core drivers of inflation—from supply chain shocks to Russia’s assault on Ukraine to corporate profiteering.
In an interview with HuffPost on Wednesday after the Fed announced a 50-basis-point rate hike—the seventh increase of the year—Warren said Powell is “pushing hard to get more people fired because he thinks that is one way to help bring down inflation.”
Policy experts and economists, many of whom are calling for a rate-hike pause, have questioned the notion that mass layoffs are necessary to rein in prices.
Earlier this week, the Labor Department released data showing that inflation cooled more than expected in November even as hiring remained strong, the unemployment rate held steady at a historic low, and wage growth was slightly better than anticipated.
“Inflation can normalize without taking a hammer to the head of the economy,” Josh Bivens, research director at the Economic Policy Institute, said Tuesday.
But Powell—who has openly targeted workers’ wages as CEO pay runs rampant—brushed aside such arguments during his press conference Wednesday, claiming there is no “painless way to restore price stability.”
“There will be some softening in labor market conditions,” Powell said, Fed-speak for job losses.
Accompanying the Fed’s latest rate hike announcement were updated economic projections indicating that central bank officials expect the current U.S. unemployment rate of 3.7% to rise to 4.6% next year—which means around 1.6 million people could lose their jobs.
Experts voiced concern that the Fed’s projections could understate the coming damage, downplaying the potential for widespread job losses fueled by the central bank’s policy moves.
“We know the effects of the rate hikes to date have not been fully felt, and with more on the way, I worry they will be right that unemployment does rise, and possibly by a lot,” Dean Baker, senior economist at the Center for Economic and Policy Research, tweeted Thursday.
Skanda Amarnath, executive director of Employ America, similarly warned that the Fed’s projection of a nearly 1% increase in the unemployment rate is “recessionary and empirical evidence is quite clear that it leads to further increases in subsequent years in the absence of a policy intervention.”
“Substantial net job losses come with persistent and long-term costs that are strategically and morally uncalled for,” Amarnath wrote.
