Rocky recovery to keep U.S. unemployment high, Fed’s Bostic says
Federal Reserve Bank of Atlanta President Raphael Bostic said he expects U.S. unemployment will be around 10% in the fourth quarter, with an uneven recovery from the COVID-19-induced recession.
“We are going to see sort of some bumps on our journey through recovery,” Bostic said in a telephone interview, noting that the downturn especially is hurting minorities and low-income workers.
“I think the second half of the year is going to be pretty strong, certainly much stronger than the first half, but I am not anticipating this will be a smooth, straight line up,” he said.
Systemic racism in the U.S. has been a barrier for minorities, and there’s a “moral and economic imperative” to end discrimination, Bostic wrote Friday in an essay on the bank’s website. The comments echoed Fed Chairman Jerome Powell, who said the central bank has no place for racism in his press conference last week. Both Fed leaders noted that minorities are faring worse in the current recession.
Bostic said he was intrigued with a proposal by economists Jared Bernstein and Janelle Jones from Groundwork Collaborative that urged the Fed to target the African American unemployment rate when it makes policy decisions. Black joblessness rose to 16.8% in May even as the overall rate fell to 13.3% amid a recovery in jobs.
“I think it is an interesting idea,” he said. “It is probably not the case that a single metric should be sufficient” and an approach looking at a “suite of metrics” might be better.
The Fed opened its Main Street lending program for small and medium-sized businesses on Monday and is considering additional programs, Bostic said. One that may have particular importance is lending to nonprofit organizations, which have been stressed during the crisis, he said.
There’s also a need for Congress and the White House to do more, with support for the very smallest of businesses being especially important, he added.
“I hope our legislators do see the utility and importance of making sure that we don’t see lasting damage in sectors of our economy,” Bostic said. “I will do all I can to make the case.”
Bostic said he supported the Fed’s policy-committee vote last week to keep interest rates near zero. Central bankers penciled in no rate hikes through 2022.
“We need to make sure that the economy achieves both of our mandates before we robustly start trying to normalize our policy stance,” Bostic said, which means reaching full employment and 2% inflation. “There is real value in making sure expectations around inflation don’t degrade because we never seem to hit that target.”
In their first forecasts since December, Federal Open Market Committee participants projected an unemployment rate of 9.3% at year’s end, edging down slowly over the next two years, with inflation below the Fed’s 2% target through 2022 amid weak demand.