▶ Watch Video: Minneapolis Fed chief says economy still “in a deep hole” due to pandemic The following is a transcript of an interview with Minneapolis Federal Reserve Bank President Neel Kashkari that aired Sunday, May 9, 2021, on “Face the Nation.” JOHN DICKERSON: We go now to Minneapolis Fed President Neel Kashkari. Thanks so much for joining us. I want to jump right in here to the first question, which is the April jobs report. Help us understand what it means about that specific report and then what you think can be determined, if anything, about the larger state of the economy. FEDERAL RESERVE BANK OF MINNEAPOLIS PRESIDENT NEEL KASHKARI: Well, JOHN, I think we shouldn’t overreact to any one report, either the really good report that came out the month prior or last week’s report as well. But I think the bottom line is we are still somewhere between eight and 10 million jobs below where we were before the pandemic. Roughly eight to 10 million Americans ought to be working right now if the COVID crisis had not happened. So we still are in a deep hole and we still need to do everything we can to put those folks back to work more quickly. Let me just give you one example, when the financial crisis hit in 2008, it took 10 years to rebuild the labor market and put the economy fully back together. That is far too long. And so we at the Federal Reserve are doing everything we can to accelerate that job market recovery because it’s good for the economy and it’s good for families all across the country. JOHN DICKERSON: Well that specter of a slow, plodding 10-year recovery is what has everybody worried. Speaking of worry, the question of risk, individual risk perception, we do see that people have more money than they seem to be spending. Give us your understanding of personal risk choices that people are making and can that really be changed? And if so, how? KASHKARI: I think, you know, your discussions with Dr. Gottlieb and the Commerce Secretary were exactly right. You know, the- it wasn’t simply the lockdowns from the government that put a damper on the economy. It was each of us, each of your viewers, each family taking actions to protect themselves. Yesterday, for the first time in over a year, I got back on an airplane because my wife and I had been vaccinated and we felt comfortable. But it’s going to take time for that psychology to change. And so I do think that there is some truth to the unemployment benefits maybe being a disincentive. I see that in the data and I see that in anecdotes as we talk to people. I also think that childcare shortages are a big impediment to people coming back in with schools still being partially closed. And I think that fear, the risk of, hey, I don’t want to get back onto a crowded bus if that’s what it’s going to take to go to my job. Now, the good news is over the next three or four months, each of those factors should get better. As the vaccine continues to penetrate, as the virus continues to slow down, schools reopen and people regain their confidence. Those things should get better, which should lead to strong growth in the second half of the year and strong labor market recovery, I hope. JOHN DICKERSON: It feels like you’re putting- telling all of us to look to September when two of those things are happening, school restarts and those federal unemployment benefits will go away. So is that a smart way to think about this? Maybe a little bit sluggish until we get in September? People are more prodded to work because they’re no longer getting unemployment benefits. And those who worry about having kids at home, well, the kids will be off at school. KASHKARI: I think those two factors, and I’m assuming continued vaccine penetration will give all of us more confidence. So, you know, for me, I’m thinking about myself. My wife and I are vaccinated. When are we going to go back into a crowded restaurant where we might be around other people who are unvaccinated? That gives me some pause even though I know how effective the vaccines are. As the overall population vaccine penetration goes up, I’m going to feel more confident. So I think all three of those factors are all going to trend in a better direction over the next few months. And of course, we have to watch, you know, Dr. Gottlieb and others can advise us on the variants, but the trend is obviously very good, which should boost confidence. JOHN DICKERSON: We have 30 seconds before the break. Anything else in the April jobs report that stood out to you? KASHKARI: Well, women continue to be disproportionately affected by the pandemic. I think the women, the data went down for women. Actually, there was no job growth. I don’t want to overreact to one month, but the childcare issues continue to be paramount. And that’s why getting schools fully reopened, getting kids vaccinated, that’s also going to be key to really restoring our economy and getting back to full productivity. JOHN DICKERSON: OK, we’re going to take a break really fast right now. But Neel Kashkari, stay with us. We’ll talk to you on the other side of the break. We’ll be right back. (COMMERCIAL BREAK) JOHN DICKERSON: Welcome back to FACE THE NATION. We continue our conversation with Minneapolis Fed President Neel Kashkari. I want to underscore what you said when we started, which is don’t overdo it on looking at one month report. However, the projections were that there was going to be a million jobs in this one month. So that’s an enormous miss. What I wonder is- is there something about this response to the pandemic coming out of it that has kind of thrown off all our abilities to measure economic activity and- and to project what our economic activity will be? KASHKARI: Absolutely. I mean, this is unlike any other economic shock in any of our lifetimes. This is very different than the financial crisis. And as we talked about earlier before the break, a lot of this is being driven by people’s own feelings of per- personal safety, their own health for themselves and their families. It’s very hard to model that out and to know, you know, Dr. Gottlieb talked about- we’ve spent a year conditioning all of us to wear masks, to be safe, to be cautious. Now we have to start to change what we’ve been telling people and get people to change how they feel inside. And so we can put out economic forecasts of how people are going to respond to different incentives, but it’s really uncertain. And so it is still the virus and people’s- the reality of the virus and people’s feeling safe about the virus that’s ultimately going to drive this economic recovery. I think the- the hope is that Congress has been so aggressive in the past year and the Federal Reserve has been so aggressive in the past year that we have positioned the economy for a fast recovery, not a 10 year recovery. But there’s still a great deal of uncertainty about the virus, but also about how we are all feeling and the confidence that ultimately we need to have to fully restore the economy. JOHN DICKERSON: What does the recovery look like, actually? So if it’s not 10 years, how many years are we talking about? And is it just replacing the eight million jobs or is it replacing the 10 million that we would have if we hadn’t been hit by this pandemic? KASHKARI: Oh, it’s the- for me it’s the 10 million, because our population continues to grow, and so those are new people potentially entering the workforce, hopefully entering the workforce. So you were exactly right. If the pandemic had not hit, we estimate there would be 10 million more Americans working today, both people who already had jobs and new entrants in the labor force. We need to put all of them back to work. And so at the Federal Reserve, we’re focused on achieving what we call maximum employment, as many Americans as possible, gainfully employed and contributing to our economy. And so for me, I’m looking at when do we recover those 10 million jobs? I think it’s going to take a few years before we can fully get back to that place. But, you know, two years is much better than 10 years. If we can do it faster, so much the better. JOHN DICKERSON: The Fed thinks about maximum employment and prices. Tell us in this strange world we’re in right now what we should think about inflation and prices when we should be nervous, when we should not remember stories from the 1970s and overreact. KASHKARI: Yeah, well, we aim for an average of 2% inflation over time. For 10 years, we’ve been undershooting that 2% inflation target. Now we know just based on math that in the next few months the inflation numbers are going to look high because the way inflation is calculated, it’s a rolling 12 months. And so last year, last March, the inflation numbers plummeted, oil prices plummeted. Those data are going to now fall out of the calculation. So just based on math, we know the inflation numbers are going to look high in the next few months. We also know there are short term supply chain issues that you talked about earlier with semiconductors. So what we’re very focused on the- in the Federal Reserve is looking deep at the data to determine are these short term mathematical supply chain issues that should resolve themselves or are they longer term inflation issues? And so for me, I’m very skeptical that we’re going to have sustained high inflation if we still have five or 10 million Americans out of work. We think the labor market is really what’s going to drive inflation over the long term. And so we look at a lot of different data. Right now, I’m not concerned about a repeat of the 1970s. I do think inflation is going to pop in the near term, but that is likely going to be transitory. But if we’re wrong and if high inflation comes because of a lot of government spending over the next few years, the Federal Reserve has the tools to make sure that we do not have a repeat of the 1970s. That is certainly not my base-case scenario. But if that were to happen, we know how to deal with that. JOHN DICKERSON: All right, Neel Kashkari, thank you so much for putting it all into perspective for us. We appreciate it.hts. We’ll be right back.