Stocks plunged earlier this month after the closely watched November jobs report showed a resilient labor market.
They fell again on Thursday when weekly numbers showed the number of Americans filing for unemployment benefits fell, indicating a still-tight labor market.
“There’s an imbalance in the labor market between supply and demand,” he said, adding that it will take a “substantial period” to fix that imbalance.
That path to the Fed’s 2% inflation target is through the jobs market.
“There will be some softening in labor market conditions,” Powell said.