Richmond Federal Reserve President Tom Barkin said Tuesday that he was pretty optimistic that the U.S. labor market would unclog by the end of summer.

“I am one of those people who believes there are temporary factors that are holding us back. I don’t believe we’re done at this point,” Barkin said, in an interview webcast by MNI Market News.

“I really do think, expect and hope that when we get to August and September we’re going to see really good numbers,” he added.

“To me, it will be an indicator that the job market is unclogged,” the Richmond Fed President

Fed Chairman Jerome Powell and his allies at the Fed have noted that the economy is still 7.6 million jobs short of the pre-pandemic level of employment.

Some other Fed officials and economists argue that this figure is misleading because many workers have voluntarily decided to retire and these jobs aren’t going to come back.

Barkin said temporary factors like child care, worries about the pandemic, and hopes for good starting pay at traditionally low skilled jobs is clogging the market. Workers’ wage aspirations have increased after the talk in Washington earlier this year about a $15 minimum wage.

Barkin said all these factors would sort out – and that job growth will be stronger.

“I think we’ve got a long way to go on the job front,” he said, while noting that perhaps not all of the 7.6 million jobs lost during the pandemic will return.

The Fed is buying $120 billion per month in asset purchases, along with keeping interest rates close to zero, to help the economy survive the pandemic.

The Fed said it need to see “substantial further progress” before it would start to slow down asset purchases.

The Richmond Fed President, who is a voting member of the Fed’s interest-rate committee this year, said he doesn’t want to begin to taper the asset purchases until there is more progress in the labor market.

“For me, substantial further progress has an inflation piece and an employment piece. On the inflation side, I think you can argue reasonably compellingly we’ve made substantial further progress. On the employment piece, I’d still make the case that…it doesn’t feel yet like substantial further progress,” Barkin said.

Barkin said he was looking closely at the employment-to-population ratio, which has fallen in the wake of the pandemic and hasn’t yet recovered.

The Labor Department will release the June employment report on Friday.

Barkin said that he would like to build in “optionality” into any slowing of its asset purchases that would allow the Fed the flexibility to move depending on the strength of the economy.

The S&P 500 index
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moved further into record territory on Tuesday after some of the biggest banks announced dividend hikes.

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