By Howard Schneider

WASHINGTON (Reuters) – U.S. employment is “still a bit short of the mark” for the Federal Reserve to begin reducing its monthly bond purchases, Fed Governor Lael Brainard said on Monday in remarks highlighting the risk that a resurgent pandemic may continue to thwart hiring into the fall.

Brainard repeated language from the Fed’s latest policy statement and said that she believed that the Fed’s monthly bond purchases of $120 billion would be reduced if the hiring rate continues to rise “as I hope”.

In remarks she made for the National Association for Business Economics Conference, Brainard also warned that August’s slowdown in hiring could be sustained by the spreading of the Delta coronavirus to restaurants and travel, as well as other economic sectors.

Brainard explained that employment gains in the leisure- and hospitality sectors fell in August. The September labor report could be weaker than expected and may not reflect underlying economic momentum. Given the unpredictable nature of the virus, we need to take a humble view on our abilities to accurately predict future economic conditions.

Since joining the Fed in 2014 Brainard has played an important role. Her comments suggest that a decision about when the Fed will reduce its bond purchases could be influenced by the September jobs report. This report, which will be published on Oct. 8th, will be the Fed’s last employment report until the early November policy meetings.

Brainard spoke out about the fact that, despite the recent gains in hiring, the “employment level remains at over 5,000,000 below its pre-COVID levels” and is nearly 8 million lower than it would be if COVID was not in place.

Brainard also stated that recovery in labor force participation had slowed, something that can distort data, such as showing that more unemployed are available than there is. She said that she believes people who are out of work will find new jobs over time.

She stated that the current high level of inflation was largely caused by factors that will change over time.