This year, the Federal Reserve is taking a “listening tour” of America in order to update its economic policies and strategy. In an article for Vox, economist Jared Bernstein analyzed a recent Fed panel where LISC CEO Maurice A. Jones described how the tight labor market has the potential to help those the economy has long left in the dust. The Fed, noted Bernstein, would do well to heed that insight.
The excerpt below is from:
The Fed is doing something new: listening to low-income workers
By Jared Bernstein, Vox
When Jerome Powell, the chair of the Federal Reserve, gives a press conference, Fed reporters and market analysts pore over every word, looking for hints about the Fed’s plans and what they might mean for the economy. So it was striking that a few of the more important and unusual comments from Powell’s presser last week went largely unnoticed. Allow me to correct that here.
First, a bit of context. A few weeks ago, Powell attended a “FedListens” conference in Chicago. It’s something of a listening tour for the Fed to help review its “monetary policy strategy, tools, and communications.” As part of the initiative, the central bank is holding numerous conferences throughout the year, during which it can hear from outsiders to help inform its review.
During one panel in Chicago, Maurice Jones, president of the Local Initiatives Support Corporation (LISC), a national organization that works with local partners to bring economic opportunity to places that have too little of it, was asked by the moderator, Boston Fed president Eric Rosengren, about the implications of tight labor markets — meaning low unemployment, such as we have at the moment — for the low-income communities that LISC serves.
“The best thing for them is prolonged, low unemployment,” Jones replied. “No question about it. … Businesses are coming to us … they were not coming to us before this period. ... From the standpoint of fighting poverty, the longer we can have low unemployment, the better, and that’s what we wish for.”
But the Fed has historically seen a prolonged period of low unemployment as a dilemma — it could lead to ever-higher inflation. And when that happens, the Fed might need to slam the brakes and raise interest rates, which could then lead to a recession. Given that the least advantaged get hurt the most by recessions, Rosengren asked Jones whether he worried about that potential scenario.
Jones was unmoved. “For the communities that we work in, recession has been a constant for years. They don’t fear recession. That’s their lives,” he said. “So the chance to have the opportunity to get work is the primary … they’ll take that risk.”
Now fast-forward to Powell’s press conference last week. Powell was asked to comment on the fact that even with unemployment at a 50-year low, the Fed is contemplating lowering, not raising, the benchmark interest rate it controls.
Powell’s response was noteworthy...