Lael Brainard: How should we think about full employment in the Federal Reserve's dual mandate?

Speech (via webcast) by Ms Lael Brainard, Member of the Board of Governors of the Federal Reserve System, at the Ec10, Principles of Economics, Lecture, Faculty of Arts and Sciences, Harvard University, Cambridge, Massachusetts, 24 February 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I want to thank Jason Furman and David Laibson for inviting me to join your economics class. I often found it difficult in introductory economics to connect the abstract concepts in the textbooks to the real-world issues I cared about. So the one message I hope you remember from today is that economics provides powerful tools to enable you to analyze and affect the issues that matter most to you.

With jobs down by 10 million relative to pre-pandemic levels, one issue that matters fundamentally to all of us is achieving full employment. So today I want to talk about both the Federal Reserve's responsibilities with regard to full employment and different approaches to assessing where we are relative to that goal.

The belief that the federal government has a responsibility for full employment has its roots in the Great Depression. It was given statutory expression at the end of the Second World War when policymakers and legislators feared that the millions of American soldiers returning to the labor market would face Depression-era conditions. In the Employment Act of 1946, the Congress directed the federal government as a whole to pursue "conditions under which there will be afforded useful employment for those able, willing, and seeking work, and to promote maximum employment, production, and purchasing power."