Goldman’s Hatzius says Covid damage on labor market will last into 2022, stimulus still needed

Goldman’s Hatzius says Covid damage on labor market will last into 2022, stimulus still needed

Goldman Sachs chief economist Jan Hatzius told CNBC on Friday the U.S. labor market still has a ways to go before it has fully overcome the damage from the coronavirus pandemic, justifying additional assistance from Washington.

Hatzius made the comments in an interview on "Squawk on the Street," following the release of the better-than-expected February jobs report. Nonfarm payrolls rose by 379,000 in the month, compared with expectations of 210,000 new jobs. The unemployment rate dropped to 6.2% from 6.3%.

"Overall, I would definitely say this was a pretty solid report but ... the economy and the labor market are still far away from where they ultimately need to be," Hatzius said.

That's why both fiscal and monetary policymakers should continue to provide support to the economy, he added.

The U.S. Senate is currently negotiating a $1.9 trillion Covid stimulus bill, with Democrats in the upper chamber hoping to pass the legislation by this weekend. Some Republicans and economists have worried the stimulus proposal is too large, given how far the economy has already recovered, and could unleash problematic inflationary pressures.

The risk of permanent scarring to the U.S. economy remains, Hatzius said, even if so far the evidence pointing to lasting workforce damage is