Saturday 10 December 2022
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Economic Recovery? Ask the Fed

Julianne_ MalveauxBy Julianne Malveaux
( – Has the Great Recession ended with our economy returning to normal? That may be “conventional wisdom”, or the word we get from those who think that there is no more intervention needed to stimulate the economy. President Obama has bragging rights on the reduction of unemployment rates and the fact that economic growth is robust. Citing these improvements, our Republican Congress wants to continue to tighten the federal budget belt. Despite this, the Federal Reserve Bank’s Open Market Committee says that there is too much slack in the labor market, and that unemployment rates could be lower than they are now.

February’s 5.5 percent unemployment rate is a vast improvement over the double-digit rates we experienced in 2009. And the African American unemployment rate, at an unacceptable 10.4 percent, has also dropped since the Great Recession began. Still, wages have been stagnant, and while more people have jobs, too many of those jobs are in low-wage sectors, and others have not received raises in years. The labor market simply hasn’t recovered from the Great Recession. Workers are still struggling for stability.

The Fed seems to be doing more to address labor market challenges than others are. It was expected that the Fed would raise its interest rate, signaling banks and others to raise interest rates as well. Those increases are likely to take place before the end of the year, but not as soon as many had expected. That suggests that while some have embraced the notion of economic recovery, the Fed says we can do better.

Some people are experiencing economic recovery, but too many are not. The 10.4 percent black unemployment rate is closer to 20 percent when the number of people who have dropped out of the labor market, and when other indications of labor market underutilization are considered. The persistent racial unemployment gap is only one of the ways we can measure differences in the recovery experience. The Fed is not the only entity that recognizes that the recovery experience is mixed. The National Urban League’s State of Black America report says that African Americans are in an economic crisis.

Why does the Fed recognize a phenomenon that too many others don’t? Why are they hesitating to set interest rates that are consistent with economic recovery? Why aren’t they as concerned about inflation as others are? The Fed seems to be cognizant of the fact that low unemployment rates combined with low wages are hardly a formula for economic recovery.

I’m not a pessimist. Every economic indicator seems to suggest that the economy will continue to improve, with unemployment rates perhaps dropping as low as five percent. That’s good news, and it will be great news for Democrats as we move toward the 2016 elections. New college graduates are getting better offers this year than they got a year ago, although those who graduated in 2008 and 2009 have yet to recover from their recession-related underemployment. There is some cause for optimism in coming months. But the Fed is suggesting that any celebration is preliminary.

While I am not a pessimist, I am a realist. President Obama has the opportunity, in these last two years of his presidency, to address that racial economic gap. He has already spoken of income inequality in stronger ways than he did during his first term of office. Now, with little to lose, he might take the opportunity to also talk about black unemployment, the racial wealth gap, and racial differences in other economic experiences. I’m not sure that our president will step that far out on a limb, but the Fed’s assertion that there are more possibilities for economic improvement perhaps opens the door for him to talk about the ways the overall economy benefits when the African American community is fully engaged in economic recovery.

While the Fed says there is room for improvement, and wages are still stuck at the bottom, Congress continues to offer tax breaks to those at the top. There is lots of rhetoric about economic inequality, but few policymakers have been willing to roll up their sleeves and tackle the issue, working to raise the minimum wage and to actively engage in job creation. While the Fed is likely to increase interest rates before the end of this year, their most recent report should stimulate action to provide better employment opportunities for those who are still waiting to experience economic recovery.