"The end result of the shift will be that we'll test new lows in unemployment," said Peter Hooper, Deutsche Bank's global head of economic research. "That is going to ultimately raise wages and labor's share" of the economic pie.
Under the Fed's old modus operandi, the labor market was very tight less than 5% of the time since 1980, he said. Its new approach will make that happen more frequently, giving workers added leverage.
Fed Vice Chairman Richard Clarida, who played a leading role in fashioning the new framework, has pointed out that taut jobs markets boost labor's share of income. That's exactly what happened prior to the pandemic when joblessness was at a half-century low.
Economists have posited various reasons why workers have lost ground for decades. Some cite globalization and labor-saving technology. Others blame the declining power of unions. Still others cite the rise of dominant companies that hold sway over employees.
Biden has proposed numerous measures in response, from imposing a 10% tax penalty on companies that offshore operations to making it easier for workers to form unions.
But even if the Democrats narrowly take control of the Senate, they won't be able to come up with the 60 votes required to end filibusters by Republicans on the bulk of Biden's legislative program for labor, according to analysts Andy Laperriere and Don Schneider of Cornerstone Macro.
"The new president is going to have to focus on the executive agenda," said Economic Policy Institute Senior Economist Heidi Shierholz.
Biden could require federal contractors to pay a higher minimum wage and meet other criteria favorable to workers. He also could revise overtime pay rules and tell regulators to carry out more robust pandemic-related enforcement of workplace safety.
In the end, though, his best bet for turning the tide in favor of workers rests with Powell.
As a former Fed chair, Yellen will presumably play a key role in deciding whether Powell gets another term, assuming she's nominated and confirmed as Treasury secretary.
The two policymakers' relationship is complicated: While they worked together at the central bank for six years, Powell did beat out Yellen for the Fed's top post when President Donald Trump tapped him for the job.
Yellen has criticized some of the steps that the Powell Fed has taken to ease bank regulation.
But she also has praised the Fed's determination to pursue broad and inclusive employment "with vigor" following its strategic review.
"It's the strongest contribution that central banks can make to try to deal with inequality," she told Bloomberg's New Economy Forum on Nov. 16.(c)2020 Bloomberg News Distributed by Tribune Content Agency, LLC