Fed officials commit to fighting racism as an ‘economic issue’
Two Federal Reserve presidents said the central bank is committed to fighting racism as an economic issue, following increased disparity in U.S. labor market fortunes this year amid the coronavirus-induced recession.
“I think you have seen a pretty significant change in terms of the voice of the Fed in the last six to eight months,” Atlanta Fed President Raphael Bostic said Tuesday during a National Association for Business Economics video conference.
“We need to do a better job of understanding slack in the labor market as experienced by different groups,” said Minneapolis Fed President Neel Kashkari, who was speaking on the same panel.
The coronavirus pandemic and nationwide protests against racism have put an increased focus on inequality, leading Fed Chairman Jerome Powell and other central bankers to urge an end to discrimination and to call for policies to broaden opportunities. The unemployment rate for Blacks rose to 16.8% in May even as the overall U.S. jobless rate declined.
Kashkari said he was interested in looking at a proposal by economists Jared Bernstein and Janelle Jones that urged the Fed to target the African American unemployment rate when it makes policy decisions.
“Certainly I think it is clear that the headline unemployment is deeply flawed as a measure,” he said.
“Whether we can actually target Black unemployment directly, I don’t know,” he said, noting that Fed officials would need to be aware of inflation implications. By targeting overall unemployment in the past decade, though, the Fed didn’t achieve its goals, he said.
Bostic, who has said he wants to study the idea, emphasized that policy makers at all levels, and not just the Fed, would need to address racism to reduce inequality. In particular, workforce development and education are vital to ensuring minorities have access to better jobs, the Atlanta Fed leader said.
“You have heard a lot of Fed folks talking about the issues of institutional racism and bias,” Bostic said. “It is clearly a moral issue. But I think it is also important to recognize this is an economic issue. Structural and institutional racism that we have has really been a drag on our potential output from a U.S. economy perspective.”