(Bloomberg) -- Federal Reserve Bank of Richmond President Thomas Barkin said the US economy may be entering a period where labor supply is constrained for a long time, which could keep upward pressure on inflation and require firms to spend more to attract and keep their workforce.

“Labor supply looks like it will remain constrained,” Barkin said Friday in the text of a speech to the Virginia Economic Summit and Forum on International Trade, which was prepared before release of the November payroll report by the US Labor Department. “The Fed’s efforts to bring demand back into balance won’t be easy when Americans still have about $1.3 trillion more in savings than they did pre-pandemic and fiscal stimulus continues.”

Non-farm payrolls rose by a more-than-expected 263,000 last month, a sign of still strong demand for workers amid resilient consumer demand, and one measure of supply -- the participation rate of workers aged 25 to 54 -- was little changed at 82.4%. 

In his actual remarks, Barkin said that the November employment report showed that “layoffs remain muted because businesses seem reluctant to shed workers that they’ve fought hard to hire.”

Barkin listed several sources of labor scarcity, from declining net migration to complications arising from the pandemic, as well as retirements.

“Increasingly, I fear we are moving to an environment where labor is short, not long,” he said.

US central bankers next meet Dec. 13 and 14, and financial markets have priced in a half-point increase for that gathering. Barkin is a non-voting member of the Fed panel that sets interest rates this year. 

“The Fed has taken aggressive action to bring inflation under control, raising the fed funds rate steeply to just under 4% and making clear our intent to do more,” Barkin said. “Even so, we have seen labor demand continue to run ahead of supply.”

Chair Jerome Powell said Nov. 30 that while the time for stepping back from their pace of 75 basis-point increases may come as soon as the December meeting, the ultimate level of the policy rate and how long they have to hold it there to control inflation are more significant questions.

The inflation rate rose to four-decade highs this year, and remains far above the Fed’s target, with its preferred measure climbing 6% for the 12 months ending October.

Fed officials are closely watching the labor market where they say a shortage of workers is helping drive up wages and sustain overall demand and price increases, especially in services.

(Updates with barkin comment on November employment report in fourth paragraph.)

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