Federal Reserve Chair Janet Yellen has many economists concerned and upset over her recent comments during the House Financial Services Committee’s semiannual hearing on Federal Reserve Policy. Yellen was asked specifically about racial inequality in the job market by Representative Joyce Beatty who asked whether or not the Federal Reserve was taking the high rate of Black unemployment into consideration when assessing the health of the labor market.
Beatty is a Democrat from Ohio and was one of several Black committee members who used the semiannual hearing to urge Yellen to take the significantly high rate of Black unemployment into consideration when deciding how and when to raise interest rates.
Blacks were the hardest hit racial group in the labor market in the wake of the Great Recession. Despite having officially ended in June 2009, millions have been left unemployed, especially minority groups, with some being unemployed so long that they are no longer officially counted in unemployment numbers.
Absolving the Fed of any responsibility, Yellen said, “there really isn’t anything directly that the Federal Reserve can do to affect the structure of unemployment across groups…there’s nothing we can do about any particular group.” This is particularly troubling given the fact that the unemployment rate for Blacks was 9.5 percent in June, nearly double the 5.3 percent rate in the overall population and the 4.8 percent rate for whites.
Federal Reserve policies have already harmed the Black community. The Feds policy of considering a national unemployment rate of 5.2 percent “full employment” is devastating to the Black community because when the national unemployment rate is around 5.2 percent, Black unemployment is typically around 11 percent.
A report by the Center For Popular Democracy points out that over the last 35 years, Federal Reserve policy has “led to increased inequality, stagnant or falling wages and an American Dream that is inaccessible to tens of millions of families – particularly Black families.”
Center for Popular Democracy Director of strategic research Connie Razza issued a statement about Yellen’s apparent disregard for Black unemployment stating, ”
Chair Yellen’s response is troubling. With African Americans still mired in our own Great Recession, we should be hearing a positive vision from the Fed on how to foster full employment. While the economy is complex and the Federal Reserve’s tools are limited, there is plenty the Fed can do to improve the labor market for Black workers and to reduce racial inequality in the job market.”
Razza goes on to say, “Today, the unemployment rate for African Americans is 9.5 percent – higher than it ever was for whites during the worst months of the Great Recession. Black America is still in the middle of a Great Recession. Chair Yellen must consider the many places in our country where Black unemployment is double pre-recession levels before putting the brakes on recovery.
She then specifically addresses the negative impact raising interest rates would have, “When Chair Yellen and other Fed officials talk about raising interest rates in 2015, they are talking about intentionally slowing down the economy and job growth, which would make it harder for most Americans, and particularly Black workers, to find good paying jobs. The direct consequences of the Fed’s projected interest rate hikes would harm millions of workers.”
Economist Bill Spriggs and others suggest that the Fed focusing on full employment relative to inflation would reduce slack in the job market, which Black workers bear the brunt of, and therefore prevent employers from being able to afford to discriminate against minorities in the same way they can in slack markets. Critics believe that the Fed has focused more on the inflation part of its dual mandate at the expense of fulfilling the full employment part of its mandate.
The Fed Up campaign mobilizes communities of color around pro-employment Fed policy and is pushing for the Federal Reserve to wait for more significant wage growth before raising interest rates. The group along with many others feels that Yellen’s comment indicate an unsettling trajectory that has the Fed prepared to implement policy that would accept a Black unemployment rate of nearly 1 in 10.
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