(Reuters) – Spending by consumers and businesses could increase as people become more confident about the economy, but it could take longer for the labor market to recover because of mismatches in the labor force between the jobs lost and the jobs in higher demand, Richmond Federal Reserve Bank President Thomas Barkin said on Thursday.
Some people who lost jobs at retailers or in restaurants may not see a clear path to figuring out their next role, Barkin said during a virtual discussion organized by the Economic Club of New York.
“You’ve got a lot of companies that have chosen, even though they’re doing fine, to streamline,” Barkin said. “I think there’s real value to thinking about how we help people who have been displaced (move) into their next job or their next career.”
Many households and businesses have built up savings during the pandemic, when many businesses shut down to limit the spread of the virus, Barkin noted. That cash could boost the recovery as people begin to spend it, but consumers and businesses may need to feel better about the virus and about the economy before they make big investments, he said.
“I think the question of how and when the money comes into the economy, even if it is over four or five years, not four or five months, I think is a pretty meaningful upside,” Barkin said.
(Reporting by Jonnelle Marte; Editing by Chris Reese and Chizu Nomiyama)